Trade Secrets basics - US

   Definition of a trade secret

There are parallel federal and state trade secret laws in the United States.

Under the federal Defend Trade Secret Act (DTSA) (18 U.S.C. §1893(3)), trade secrets are defined as information, including formulas, patterns, compilations, programs, devices, methods, techniques, processes, that: (a) derives independent economic value from not being generally known or readily ascertainable by proper means by others; and (b) is the subject of reasonable efforts to maintain its secrecy.

Most states have adopted a form of the Uniform Trade Secrets Act (UTSA), which provided a standardized framework for trade secret protect.    Some states (such as New York) rely on common law, while others (such as North Carolina) have a unique trade secret statute.  The UTSA provides a definition of trade secrets that is somewhat broader than the DTSA, in that it applies to all information that derives independent economic value, actual or potential, from not being known and readily ascertainable to other persons.

   Requirements to qualify for protection

Information must have independent economic value due to its secrecy and be subject to reasonable efforts to maintain its secrecy. Requires proof of reasonable precautions taken to prevent disclosure and that the information was misappropriated by improper means (theft, breach of duty, espionage).

   Protection Mechanism

A plaintiff may bring claims under the applicable state trade secret law.  If the trade secret is related to a product or service used in interstate or foreign commerce, the owner may also bring claims under the DTSA.  A plaintiff may assert both DTSA and state-law claims, as the DTSA does not pre-empt state law.

To qualify, a claimant must show (1) the existence of a trade secret, (2) reasonable measures to maintain secrecy, and (3) misappropriation through improper means or unauthorized disclosure or use.

   Remedies

Courts may grant injunctive relief to prevent actual or threatened misappropriation (though injunctions cannot conflict with state laws or employee mobility). Remedies include damages for actual loss and unjust enrichment, exemplary damages (up to 2x) for wilful and malicious misappropriation, and attorneys’ fees. The DTSA also uniquely authorizes ex parte seizure orders to prevent dissemination of trade secrets.

   Confidentiality in Proceedings

Courts must take steps to preserve confidentiality of trade secrets during litigation (DTSA  §1835). This may include issuing protective orders, sealing records, holding in-camera hearings, restricting courtroom access, and prohibiting disclosure of alleged trade secrets without prior court approval.

   Limitation Period

For DTSA and UTSA claims, the statute of limitation is three years from when the misappropriation was discovered or should have been discovered with reasonable diligence. A continuing misappropriation constitutes a single claim. (DTSA §1835(d); UTSA §6).