Trade Secret Protection in the U.S.
A trade secret in the U.S. has three elements. First, it must have actual or potential independent economic value to the owner, provided it is not generally known. Second, the information’s disclosure or use must have economic value to those who cannot legitimately know it. Third, the owner must have made reasonable efforts to maintain its secrecy. While a trade secret can include a formula or secret method that is crucial to a company’s product, other items, such as a customer list or pricing structure, can also be considered a trade secret.
When a trade secret is misappropriated, or improperly acquired, disclosed, or used (as opposed to being revealed through proper means, such as reverse engineering, independent invention, or public website information), the government may prosecute certain acts of trade secret theft as crimes. The Economic Espionage Act of 1996 (EEA) defines and protects trade secrets, creating two criminal offenses of theft of trade secrets and economic espionage. Theft of a trade secret occurs when a theft is related to a product or service used or intended for use in interstate or foreign commerce to the economic benefit of anyone other than the owner and intending or knowing that the theft will cause injury to the owner. Economic espionage is the theft of a trade secret with the intention or knowledge that the theft will benefit a foreign government, instrumentality, or agent. The Department of Justice prosecutes these two crimes, and such a case can result in imprisonment or the payment of fines.
A trade secret owner also can file a lawsuit against another company or individual in state or federal court for theft of its trade secrets. Except in North Carolina and New York, each state’s adaptation of the Uniform Trade Secrets Act (USTA) is used in civil lawsuits. The Defend Trade Secrets Act, enacted in 2016, establishes a parallel civil right of action at the federal level for trade secrets related to interstate or foreign commerce. If a trade secret owner wins a lawsuit, it may receive a remedy that covers its actual economic loss, along with other remedies like an injunction or punitive damages.
Disclaimer:
This article is a form of attorney advertising. Hodgson Russ LLP provides this information as a service to its clients and other readers for educational purposes only. Nothing in this blog should be construed as, or relied upon, as legal advice or as creating a lawyer-client relationship.