DTSA’s Effect on Trade Secret Law

Recently, the House of Representatives approved the Defend Trade Secrets Act by a vote of 410-2. This legislation would add trade secrets to the list of intellectual property governed by Federal civil law. That list currently stands at three entries: copyrights, patents, and trademarks.

Trade secrets refer to information, not publically known, that provides your company with a competitive edge. That’s most famously demonstrated by the formula for Coca-Cola, the secret recipe for KFC’s famous fried chicken, and Google’s secret algorithms that allow them to index the internet.

Up to now, trade secrets have been handled distinctly different than other areas of IP in legal battles. Disputes over trade secrets begin in state courts, and Federal law only intervenes for criminal enforcement and prosecution.

The Defend Trade Secrets Act, or DTSA, which now has the support of the Senate, House and Obama administration, would change the way disputes over trade secrets are handled and make them more closely resemble disputes over any other intellectual property.

The DTSA is described as “the most significant expansion of federal law in intellectual property since the Lanham Act in 1946.” That legislation set the foundation for the federal governance of trademarks in the US and specifically prohibits trademark infringement, trademark dilution, and false advertising.

The DTSA sets similar regulations for trade secrets by allowing companies to sue for the theft of trade secrets and pursue damages in federal courts.

Supporters of the Act argue that the reason trade secrets require more protection than state courts are currently providing is due primarily to the sheer volume and value of trade secrets being held by US companies. The value of trade secrets being held by publicly traded companies in the US alone is estimated to be trillions of dollars by the US Chamber of Commerce. That value also makes disputes much more complex than is typically ideal for a state court case.

The DTSA isn’t without its critics, however. Many experts warn that new legislation, which would be combined with existing state law, but not replace it, would mainly benefit plaintiffs by giving them an additional forum for their complaints. This would in turn increase the time a trade secret dispute takes to resolve and increase adjudication costs.

Despite these, and other critiques centering on the DTSA’s broadly defined provisions for authorizing the seizure of a stolen trade secret, now that the House of Representatives have voted in favor of it, the DTSA is likely to become law soon.

If you have questions about how new laws will affect your company’s intellectual property portfolio, call us at Brown Patent Law: 918-315-3357.