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Trade Secrets Get Greater Protection – Benefit Business Owners

Zachary L. Weaver
Weaver Bio Webpage HS 6-3-15

Trade secrets are the lifeblood of a successful business. Be it the formula for Coke, a small business’s special manufacturing techniques, a corporate marketing strategy, or any other competitive business information that has value because it is not known to the public, trade secrets are what differentiate and give businesses an advantage over competitors. Congress has recently decided that such trade secrets and the businesses that hold them are deserving of greater protection. Last week, the Defend Trade Secrets Act of 2016 (the “DTSA”) was signed by President Obama. Applicable immediately, the Act substantially amends Chapter 90 of Title 18 of the US Code and creates a federal cause of action for theft or misappropriation of trade secrets. The law effectively federalizes a significant number of trade secret claims, adding to the federal jurisdiction over intellectual property matters that already includes patents, trademarks, and copyrights.

Previously, trade secret cases were brought in state court unless another claim involving federal law existed or the parties were from different states and a sufficient amount of money was involved. This was because the majority of states had adopted the Uniform Trade Secrets Act in some shape or form, including South Carolina which has the South Carolina Trade Secrets Act, S.C. Code 39-8-10, et seq.  The likely result of the DTSA will be that the federal and state law claims will be brought simultaneously in federal court (as the DTSA does not replace any of the claims one has under state law).

As to the specifics of the DTSA, it provides “[a]n owner of a trade secret that is misappropriated may bring a civil action . . . if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” The standards for what constitutes a trade secret are substantially similar to South Carolina’s law, providing that trade secrets cover “all forms and types of” information, regardless of how stored, where:

(1)  the owner thereof has taken reasonable measures to keep such information secret; and

(2)  the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by another person who can obtain economic value from the disclosure or use of the information . . . .

If a trade secret is proven to have been misappropriated, then there are a variety of remedies available, including injunctive relief, actual damages, unjust enrichment, and a reasonable royalty. Should the misappropriation be found to be willful or malicious, exemplary damages are available up to two times actual damages and attorney’s fees. Additionally, if certain criteria are met, the federal law provides a powerful weapon of seizure of property if necessary to protect trade secrets through an ex parte process (i.e., without the participation of the other party at issue).

There is further implication for employers and their contracts with employees. The DTSA provides immunity for whistleblowers who disclose trade secrets to government agencies or their attorneys for suspected legal violations. The law requires employers to disclose this information to employees in employment contracts or through a policy statement.

The DTSA provides additional protection to business owners so that they can safeguard the information that makes them successful, but it also involves new requirements. If you have any questions, have a potential issue involving trade secrets, need to update your policies and procedures for employees to comply with the DTSA, or wish to discuss the law generally, please do not hesitate to contact Zach Weaver at zweaver@gwblawfirm.com or 864-241-7007864-241-7007.

This website and the information within do not constitute legal advice. It is also not a substitute for legal or other professional advice. Users should consult their own legal counsel for advice regarding laws, regulations, and procedures.