Protection of Trade Secrets: The Uniform Trade Secrets Act and the Federal Defend Trade Secrets Act
For many years, owners of trade secrets have been able to enforce their rights using the Uniform Trade Secrets Act (“UTSA”). Most states, including Virginia, have adopted the UTSA. The UTSA allows civil lawsuits in state courts.
Until 2016, there was no Federal statute directly governing the law of trade secrets. In May 2016, Congress enacted the Defend Trade Secrets Act (“DTSA”). The DTSA creates Federal statutory law protecting trade secrets and allows civil lawsuits in Federal courts to enforce rights in trade secrets. The DTSA creates new remedies for owners of trade secrets to protect their secrets.
The DTSA and UTSA are similar but not identical. Here is a summary of the provisions of the two statutes:
1. What is a Trade Secret? | |
| DTSA “all forms and types of financial, business, scientific, technical, economic or engineering information…whether tangible or intangible, and whether or how stored…physically, electronically, graphically, photographically, or in writing if:DTSA “all forms and types of financial, business, scientific, technical, economic or engineering information…whether tangible or intangible, and whether or how stored…physically, electronically, graphically, photographically, or in writing if: (A) the owner thereof has taken reasonable steps to keep such information secret; and(B) the information derives independent economic value, actual or potential, from not being generally known to, and not attainable through proper means by, another person who can obtain economic value from the disclosure or use of the information”.18 U.S.C. § 1839 (3) | UTSA Similar to DTSA. UTSA does not specifically identify “financial, business, scientific, technical, economic, of engineering information” to be trade secrets. UTSA permits parties other than the “owner” of the trade secret to protect it. But DTSA defines “owner” to include a lawful licensee.Virginia Code §59.1-336. |
2. What is Misappropriation? | |
| DTSA “(A) Acquisition of a trade secret of another by a person who knows…that the trade secret was acquired by improper means; or(B) disclosure or use of a trade secret without express or implied consent… [of the owner of the trade secret]”.18 U.S.C. § 1839 (5) | UTSA Similar to DTSA.Virginia Code §59.1-336 |
3. What is “Improper Means”? | |
| DTSA Similar to UTSA.DTSA defines “reverse engineering, independent derivation, or any other lawful means of acquisition” not to constitute “improper means”. UTSA lacks this exclusion.18 U.S.C. § 1839 (6) | UTSA “includes theft, bribery, misrepresentation, use of a computer or computer research without authority, breach of a duty or incident of a breach of a duty to maintain secrecy, or espionage through electronic or other means”.Virginia Code §59.1-336 |
4. What is the Statute of Limitations? | |
| DTSA Three years from the date the misappropriation is discovered or reasonably should have been discovered.18 U.S.C. § 1836 (d) | UTSA Same as DTSA.Virginia Code §59.1-340 |
5. Whistleblower Exception | |
| DTSA Disclosure of a trade secret is made “(1) in confidence to a…Government Official…, or to an attorney; and(2) solely for the purpose of reporting or investigating a suspected violation of law; or(3) in…lawsuit…if such filing is made under seal.”18 U.S.C. § 1833The “whistleblower” exception applies both to employees and independent contractors. | UTSA No similar provision. |
6. Required Notice of Whistleblower Exception | |
| DTSA Employers must notify employees and independent contractors of the whistleblower exception outlined in point 5 above. The notice must be in the employee’s or independent contractor’s contract or in another document if the contract refers to it.18 U.S.C. § 1833 | UTSA No comparable provision. |
7. Consequence of Failure to Provide Notice | |
| DTSA No award of exemplary damages or legal fees against employee who did not receive notice that the “whistleblower” exception exists.18 U.S.C. § 1833 | UTSA No comparable provision. |
8. Remedies | |
| DTSA a. Damages (1) Plaintiff’s actual loss; (2) Defendant’s unjust enrichment; (3) Reasonable royalty imposed on defendant; (4) Exemplary damages up to two times plaintiff’s actual damages (if misappropriation is wanton and malicious). (5) Prevailing party’s legal fees if (i) defendant misappropriated trade secret willfully and maliciously, or (ii) plaintiff brought lawsuit in bad faith.b. Injunctions Available.c. Civil Seizure Upon ex parte application in “extraordinary circumstances”. 18 U.S.C. § 1836 | UTSA a. Damages Similar to DTSA. Virginia Code §59.1-338b. Injunctions Similar to DTSA. Virginia Code §59.1-337c. Civil Seizure No comparable provision. |