Intellectual property

trade secrets

Trade Secret Definition

Under state and federal law, a trade secret generally:

• is information that has either actual or potential independent economic value by virtue of not being generally known;

• has value to others who cannot legitimately obtain the information; and

• is subject to reasonable efforts to maintain its secrecy.

All three elements are required; if any element ceases to exist, then the trade secret will also cease to exist. Otherwise there is no limit on the amount of time a trade secret is protected.

Protection of Trade Secrets under Federal Law

The federal Economic Espionage Act of 1996 criminalizes trade theft under two sets of circumstances. Economic espionage refers to the theft of a trade secret “intending or knowing that the offense will benefit any foreign government, foreign instrumentality, or foreign agent.”

The second offense—the theft of trade secrets—addresses theft “that is related to a product or service used in or intended for use in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret.”

These crimes are prosecuted by the Department of Justice (DOJ) and are punishable by imprisonment and fines. The Economic Espionage Act is located in the United States Code, beginning at 18 U.S.C. §1831.

The federal Defend Trade Secrets Act of 2016 (DTSA) amended the Economic Espionage Act to establish a private civil cause of action for the misappropriation of a trade secret. See 18 U.S.C. §1836. This cause of action provides trade secret owners with a uniform, reliable, and predictable way to protect their valuable trade secrets anywhere in the country.

The DTSA does not preempt existing state trade secret law—giving trade secret owners the option of state or federal venues.

U.S. courts can protect a trade secret by (a) ordering that the misappropriation stop; (b) ordering that the secret be protected from public exposure; and (c) in extraordinary circumstances, ordering the seizure of the misappropriated trade secret. At the conclusion of a trade secret case, courts can award damages, court costs, reasonable attorney fees, and a permanent injunction, if warranted.

Trade Secrets v. Patents

Trade secret protection is a complement to patent protection. Patents require the inventor to provide a detailed and enabling disclosure about the invention in exchange for the right to exclude others from practicing the invention for a limited period of time. Patents expire, and when that happens the information contained within is no longer protected.

But unlike trade secrets, patents may protect against independent discovery. Patent protection also eliminates the need to maintain secrecy.

While the definition of protectable “information” is very broad under trade secret law, there are more limitations on what can be protected by a patent. If a given invention is eligible for either patent or trade secret protection, then the decision on how to protect that invention depends on business considerations and weighing the relative benefits of each type of intellectual property protection.

State Laws

Most states have enacted the Uniform Trade Secrets Act (UTSA) and it is located in each state’s statutes. The UTSA’s definition of a trade secret is similar but not identical to the definitions in the federal statutes.

Inevitable Disclosure Doctrine

Even among states that have adopted the UTSA, the courts in some states have adopted the inevitable disclosure doctrine, which allows a trade secret owner to prevent a former employee from working for a competitor if there is a risk the trade secrets could be disclosed. But some states—such as California—have rejected the inevitable disclosure doctrine.

And under federal law, the DTSA expressly rejects the inevitable disclosure doctrine.

State Statutes for the State of Texas

Federal Statutes

§ 4606. Protection of information

Notwithstanding any other provision of law, intellectual property, trade secrets, and technical data

§ 4602. Grants to Sematech

(5) That (A) the Secretary of Defense be permitted to use intellectual property, trade secrets, and owned and developed by Sematech in the same manner as a participant in Sematech and to transfer such intellectual property, trade secrets, and technical data to Department of Defense contractors for use in connection

§ 8112. Definition

matters relating to the enforcement of laws protecting copyrights, patents, trademarks, other forms of intellectual property, and trade secrets, both in the United States and abroad, including in particular matters relating

§ 3719. Prize competitions

against the administering entity arising out of the unauthorized use or disclosure by the agency of the intellectual property, trade secrets, or confidential business information of the participant.

§ 404a. Specific limitations

(2) compel the disclosure, transfer, or licensing of intellectual property to any third party (such as patents, copyrights, trademarks, trade secrets, and proprietary information); or

§ 4301. Definitions

(C) the licensing, conveying, or transferring of intellectual property, such as patents and trade secrets

§ 30103. Local law enforcement grants

unlawful acts with respect to goods by reason of their protection by a patent, trademark, service mark, trade secret, or other intellectual property right under State or Federal law:

§ 1507. Construction and preemption

(2) to abrogate trade secret or intellectual property rights of any non-Federal entity or Federal entity