Reprinted with the permission of the Orange County Business Journal

ORANGECOUNTYBUSINESS JOURNALPage 1$1.50 VOL. 39 NO. 29 www.ocbj.com JULY 18-24, 2016

On May 11, 2016, the President signedinto law the Defend Trade Secrets Act(DTSA). The DTSA significantly expandsprotection of intellectual property rights bycreating a body of trade secrets law thatapplies nationwide and by allowingbusinesses to enforce their trade secretrights in federal court. Previously, trade secrets were protected onlyby state laws (which varied from state to state), and trade secretclaims ordinarily could be brought only in state court. The newfederal law does not preempt the state laws; it provides anadditional avenue for protection and enforcement.

What QualifiesAlong with patents, trademarks, and copyrights, trade secrets

protect some of businesses’ most valuable intellectual property. Thecategories of information that can constitute a trade secret arebroad—all types of financial, business, scientific, technical,economic, and engineering information can qualify. examplesinclude customer lists, computer source code, manufacturingmethods, and formulas. Claims are frequently brought againstemployees, contractors, and competitors.

How to ProtectUnlike patents, which require inventors to share details of

inventions with the public, trade secrets must be kept secret. Thetrade secret’s owner must take “reasonable measures” to maintainits secrecy, and the information must have value, at least in part,because it is not generally known. Also unlike patents, which expireafter a fixed period of time, trade secret protection lasts as long asthese conditions are met. (The recipe for Coca-Cola has been atrade secret for more than a century.) Businesses should take stepsto protect their trade secrets, including requiring non-disclosureagreements, implementing confidentiality policies, having passwordprotection for electronic files, and having physical access controlsfor locations where trade secret documents and information arestored.

Remedies for Misappropriation The DTSA allows parties to bring lawsuits in federal court to

obtain damages for actual loss, unjust enrichment, or a reasonableroyalty, as well as an injunction. For willful and maliciousmisappropriation, a business may also receive an award ofexemplary damages and attorneys’ fees.

A court can award exemplary damages or attorneys’ fees in alawsuit against an employee only if the employer previously

The Defend Trade Secrets Act of 2016: New Federal Protection for Trade Secretsby Michael K. Friedland and Samantha Hsu, Knobbe Martens Olson & Bear LLP

INTELLECTUAL PrOPerTy

provided the employee with notice of“whistleblower immunity.” Thus, employersshould notify employees that they cannot beheld criminally or civilly liable under theDTSA for disclosing a trade secret inconfidence to law enforcement or an

attorney for the purpose of reporting a violation of law.

The DTSA also allows parties to move aggressively at the beginningof litigation to preserve evidence of misappropriation. The DTSA givescourts the power to seize property from defendants accused ofmisappropriation using law enforcement officers—without first givingany notice to the defendants. This allows parties to prevent thedestruction or disclosure of misappropriated trade secrets that couldoccur if a defendant knew it was the target of a lawsuit—while sendinga strong message regarding the seriousness of the just-filed lawsuit.

Michael FriedlandMichael Friedland is a partner at

Knobbe Martens Olson & Bear LLP inIrvine. Mr. Friedland graduated fromHarvard Law School in 1991 and hasmore than two decades of intellectualproperty enforcement experience. Herepresents plaintiffs and defendants in alltypes of IP disputes, including patent,trademark, trade secret, copyright, andunfair competition. He represents clients in a wide variety ofindustries and technologies, including consumer goods, actionsports, tactical products, medical devices, computer software,internet services, apparel, and restaurant services. He can bereached at 949.760.0404 or michael.friedland@knobbe.com.

Samantha HsuSamantha Hsu is an associate at

Knobbe Martens Olson & Bear LLP inIrvine. Ms. Hsu’s intellectual property lawpractice focuses on patent, trademark,copyright, and trade secret litigation. Sherepresents clients in a wide variety ofindustries and technologies, includingelectronics, apparel, medical devices, e-commerce, computer software, internetservices, and food and beverages. She can be reached at949.760.0404 or samantha.hsu@knobbe.com.