How a Federal Trade Secrets Law Would Impact Silicon Valley

By Chris Preimesberger  |  Posted 2016-04-06 Print this article Print
federal trade secrets law

Supporters of SB 1890 Comprise All Business Sectors

If you look at the list of supporters for the bill, it runs the gamut of business in the United States: IT, retail, manufacturing, research, financial services, health care and so on. "Trade secrets are what separate competitors in the market, whether that's pricing, margins, or some sort of secret that the public doesn't know about in the operation of their business," Millligan said.

In the technology sector, some companies are moving away from patent protection because of the limitations of the 20-year monopoly, Milligan said.

"In patents, the IP owner only has the monopoly for 20 years, whereas with a trade secret, it's forever, so long as the information is secure," Milligan said. "You can also license trade secrets as well, subject to non-disclosure agreements. This is welcome among technology companies, if you look at the people who've come out in support of it: Intel, Boeing, Adobe, IBM, the Information Technology Council, and so on."

Levels of Software Can Be Considered Trade Secrets

In the software world, Milligan said, certain levels of software can be protected as trade secrets.

"One of the main requirements of a trade secret are the 'reasonable secrecy' measures," Milligan said. "That's built in to the definition, whether it's state law or federal law. What that means is that companies have to do a good job of documenting how they protect that information: Do they designate it as 'confidential,' do they describe it in their non-disclosure agreement to their employees and their third-party contractors—whoever can have access to the confidential information."

Milligan said that companies should be proactive in inventorying the trade secrets, and making sure they are adequately protecting that information through NDAs and password-protected files that are designated as confidential.

The idea for the legislation is also to help U.S. companies against the threat of foreign actors, Milligan said.

"Foreign actors have moles internally in the United States that are trying to acquire trade secrets, and then leave and then have it (the product) mass-produced abroad. It's trying to address that threat as well—particularly with regard to the EX-Parte Seizure Order," Milligan said.

Why EX-Parte Seizure Order is Important

The EX-Parte Seizure Order is part of the Trade Secrets bill that allows a trade secret owner to obtain an order from a judge for U.S. marshals to seize back the trade secret from the alleged bad actor without prior warning. This is to protect the trade secret owner from having the alleged bad actor skip the country or destroy the evidence before it is recaptured.

"For instance, a technology company with a foreign national or someone who's working for the company takes the technology, and you get wind of it that they've left the country. The Seizure Order provides you with the ability to get the federal government involved and marshals to seize the misappropriated goods. That's something that we don't have right now under the state regime," Milligan said.

"You can get an order from the state requiring them to return the property, but in order to get law enforcement involved to seize the goods is something that doesn't currently exist."

In summary, Milligan said: "The creation of a federal civil cause of action for trade secret misappropriation is a game changer, and will allow businesses to protect their valuable proprietary information on a nationwide basis in our federal courts. It will allow for more effective remedies to protect trade secrets and more efficient discovery than state court actions. Trade secrets will now join patents, trademarks, and copyrights as valuable intellectual property assets protected by our federal laws."

Chris Preimesberger

Chris Preimesberger is Editor of Features and Analysis at eWEEK. Twitter: @editingwhiz


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