Welcome back to Legal Geek. This week, we take a look at the newly-signed Defend Trade Secrets Act federal law and how this is a big step towards harmonizing intellectual property as much as possible.
https://archive.org/details/LegalGeekEp74
Although President Obama and Congress have not pushed through the legislative gridlock much during his final months in office, which is typical for a lame duck president, one area of notable exception was federal regulation of trade secrets. The Defend Trade Secrets Act won widespread bipartisan support in both the House and the Senate, and had no opposition from the President as well. So what does this change, and is it a good thing?
First, a little background. A trade secret is confidential proprietary information which a company chooses to hold in secret rather than publicly disclosing for coverage by patent protection or the like. It covers any valuable commercial information which allows a business to hold an advantage over other competitor businesses without the same information. The most notable example is probably the formula for Coca-Cola. By keeping such information confidential, competitors cannot make the exact same product except by reverse engineering, and protection of the business asset can continue indefinitely, instead of for the limited times provided by other IP protection like patents.
Long known as the "4th major area of intellectual property," trade secrets were historically something that were only protected on the state level based on state laws. Unlike patent and copyright, which are mandated by a clause in the Constitution, trademarks and trade secrets are not a required function of the federal government. Nevertheless, just like the Lanham Act has long made trademarks protected on the federal level, now trade secrets will be also.
Similarly, while the federal government's Constitutional mandate for patents and copyrights preempts the States from legislating those items, trademarks and trade secrets will both have protection at the state level thanks to state laws and at the federal level thanks to Congress passing laws under the Commerce Clause of the Constitution. Thankfully, in the case of trade secrets, the state laws and the federal law do not differ by much in most circumstances.
However, one of the key benefits of the DTSA is harmonizing the various state laws, which mostly implemented a blueprint treatise called the Uniform Trade Secrets Act, but sometimes in slightly different ways. Allowing trade secret lawsuits into federal court allows for more predictable, nationwide case law to be developed on this subject. In addition, federal courts tend to be more well-versed at handling cross-state and international disputes which often arise in IP contexts. It is typically a net positive to have multiple venues available to handle a dispute, and that will now be the case for trade secrets.
The Bottom Line is, regardless of whether you support the idea of trade secret protection or IP law in general, having more uniformity and clarity of laws is a step in the right direction. The hope is that the DTSA can offer a fairer balance of employee rights in mobility to other jobs and employer rights in protecting confidential information and advantages. Time will tell if it serves this purpose, or becomes a contorted mess like some other areas of law.
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