American Intellectual Property Law Association
Shhhh! Trade Secrets Update
Yuichi Watanabe
AIPLA IP Practice in Japan Committee
January 27-28, 2015
Firm Logo
11
Background – Trade Secrets in the U.S.
• Predominantly governed by state law, not
federal law, under the model of UTSA
• UTSA: Uniform Trade Secrets Act
– Drafted by the Uniform Law Commission (ULC)
– Codified basic principles of common law trade secret
protection
– Approved and recommended by American Bar
Association for enactment in all the states
– As of January 21, 2015, Adopted by 47 states
• All but New York, North Carolina, and Massachusetts
Firm Logo
http://www.uniformlaws.org/shared/docs/trade%20secrets/utsa_final_85.pdf
22
Background - Uniform Trade Secrets Act
• Defines “trade secret” as information, including
a formula, pattern, compilation, program, device,
method, technique, or process, that:
– (i) derives independent economic value, actual or
potential, from not being generally known to, and not
being readily ascertainable by proper means by, other
persons who can obtain economic value from its
disclosure or use, and
– (ii) is the subject of efforts that are reasonable under
the circumstances to maintain its secrecy.
Firm Logo
33
Background - Uniform Trade Secrets Act
• Defines “misappropriation” as:
– (i) acquisition of a trade secret of another by a person
who knows or has reason to know that the trade
secret was acquired by improper means; or
– (ii) disclosure or use of a trade secret of another
without express or implied consent by a person who
acquired the trade secret or knew the trade secret
was acquired by improper means.
• Defines “improper means” as including at least:
– theft, bribery, misrepresentation, breach or
inducement
of a breach of a duty to maintain secrecy,
Firm Logo
or espionage through electronic or other means
44
Background - ULC Comments on UTSA
• There are “proper” means to acquire trade
secret, including at least:
– Discovery by independent invention;
– Discovery by “reverse engineering”;
– Discovery under a license from the owner of the trade
secret;
– Observation of the item in public use or on public
display;
– Obtaining the trade secret from published literature
Firm Logo
55
Background – Other Statutory Bases
• Federal Criminal Statutes
– Economic Espionage Act of 1996
– *Theft of Trade Secrets Clarification Act of 2012
– *Foreign and Economic Espionage Penalty
Enhancement Act of 2012
*Amended Economic Espionage Act
– Computer Fraud and Abuse Act
• Federal Civil Statutes
– None!
Firm Logo
66
New (Proposed) Legislation
• Currently, a federal civil cause of action does not
exist for trade secrete misappropriation
– Congress has considered numerous bills over the
years, but none has passed
• The latest proposed bills are:
– Trade Secrets Protection Act of 2014
• House Bill
– Defend Trade Secrets Act of 2014
• Senate Bill
Firm Logo
77
Trade Secrets Protection Act of 2014
• Summary
– Authorizes owner of a trade secret related to a
product/service used in interstate/foreign commerce,
who is aggrieved by misappropriation of such trade
secret, to bring a civil action to obtain appropriate
relief
– Grants district courts original jurisdiction of such
actions, subject to a five-year statute of limitations
beginning when the misappropriation is or should
have been discovered
Firm Logo
https://www.congress.gov/bill/113th-congress/house-bill/5233
88
Trade Secrets Protection Act of 2014
• Summary (cont’d)
– Authorizes courts, upon ex parte application, to issue
an order providing for seizure of property necessary
to preserve evidence in such civil action or to prevent
the propagation or dissemination of the trade secret
– Sets forth remedies for such misappropriation,
including granting injunctive relief, awarding damages
for losses or unjust enrichment caused, and awarding
exemplary damages and attorney fees for willful and
malicious misappropriation.
Firm Logo
https://www.congress.gov/bill/113th-congress/house-bill/5233
99
Defend Trade Secrets Act of 2014
• Summary
– Authorizes owner of a trade secret aggrieved by an
act of economic espionage, theft of a trade secret, or
misappropriation of a trade secret related to a product
or service used in, or intended for use in, interstate or
foreign commerce to bring a civil action under this Act
– Authorizes courts, based on an affidavit or verified
complaint satisfying the requirements of this Act,
upon ex parte application, and if necessary to prevent
irreparable harm, to issue appropriate orders
including . . . [see next slide]
Firm Logo
https://www.congress.gov/bill/113th-congress/senate-bill/2267
10
10
Defend Trade Secrets Act of 2014
• Summary (cont’d)
– . . . (1) providing for preservation of evidence; (2)
granting an injunction to prevent any actual or
threatened violation; (3) requiring affirmative actions
to be taken to protect a trade secret; or (4) providing
for the seizure of any property used to commit or
facilitate the commission of an alleged violation
https://www.congress.gov/bill/113th-congress/senate-bill/2267
Firm Logo
11
11
Defend Trade Secrets Act of 2014
• Summary (cont’d)
– Authorizes a court to (1) grant an injunction; (2) award
damages for actual loss, damages for unjust
enrichment, and (in lieu of damages measured by any
other methods) damages caused by misappropriation;
(3) award exemplary treble damages if the trade
secret is willfully or maliciously misappropriated; and
(4) award reasonable attorney's fees to the prevailing
party if a claim of misappropriation is made in bad
faith, a motion to terminate an injunction is made or
opposed in bad faith, or a trade secret is willfully and
maliciously
Firm Logo misappropriated
https://www.congress.gov/bill/113th-congress/senate-bill/2267
12
12
Similarities Between House and Senate Bills
• The Trade Secrets Protection Act and Defend
Trade Secrets Act are very similar
– Both follow the language provided by UTSA
– Both create a procedure for ex parte seizure of
property
– Both have five-year statute of limitations beginning
from the time when misappropriation is or should
have been discovered
– Both provide injunctive relief, damages, exemplary
damages, and attorney fees
Firm Logo
13
13
Impact if Bills Pass
• More enforcement tools for trademark owners
– Owners can bring private action in either state court
or federal court
– Owners can choose between state law claims, federal
law claims, or assert both
– Brand new ex parte seizure procedure
• UTSA does not provide such a procedure
• Brand new procedure that did not exist in UTSA
• Allows trade secret owners to appear in court, without
opposition, to obtain court order for seizure of property
• Probably the most controversial provision in the proposed
Firm
bills
Logo
14
14
Opposition to Bills
• 31 law school professors presented letter to
Congress opposing legislation because:
– Effective and uniform state law already exists;
– Acts will damage trade secret law and jurisprudence by
weakening uniformity while simultaneously creating
parallel, redundant and/or damaging law;
– Acts are imbalanced and could be used for anticompetitive purposes;
– Acts increase risk of accidental disclosure of trade secret;
– Acts have negative impacts on access to information,
collaboration among businesses and mobility of labor
http://cyberlaw.stanford.edu/files/blogs/FINAL%20Professors%27%20Lette
Firm Logo
r%20Opposing%20Trade%20Secret%20Legislation.pdf
15
15
Other News
• USPTO hosted its first Trade Secret Symposium
on January 8, 2015
– “The protection of U.S. trade secrets from
misappropriation is an Administration priority.”
http://www.uspto.gov/ip/init_events/trade_secret_symposium.jsp
• EU Trade Secrets Directive
– Efforts to harmonize trade secrets law throughout EU
– Currently being debated by the European Parliament
http://register.consilium.europa.eu/content/out?lang=EN&typ=ENTRY&i
=SMPL&DOC_ID=ST-9870-2014-INIT
Firm Logo
16
16
Thanks for your attention! Questions?
Yuichi Watanabe
Partner
Osha Liang LLP
Two Houston Center
Suite 3500
909 Fannin St.
Houston, TX 77009 USA
1-713-228-8600
watanabe@oshaliang.com
Firm Logo
17
17