Photo of Vince Galluzzo

Vincent J. Galluzzo is Counsel in Crowell & Moring's Washington, D.C. office. He is a member of the firm's Intellectual Property Group, with a focus on patent, trade secret and copyright infringement litigation, intellectual property portfolio management, counseling, and licensing, as well as patent prosecution and rendering opinions on patent infringement, validity, and enforceability.

On June 15, Crowell & Moring hosted a trade secrets webinar, “What the New Federal Trade Secrets Law Means for Your Clients.” The panelists, Mark Klapow, Mark Romeo, Mike Songer, and Vince Galluzzo provided an overview Defend Trade Secrets Act (DTSA), signed by President Obama in May. The panelists also discussed how the courts are likely to interpret certain provisions and provided best practice guidance how to use DTSA to your client’s advantage.

Key Takeaways:

  1. The DTSA creates the first federal civil cause of action for trade secret litigants. Litigants can now freely access federal courts, including technology savvy judges, broad subpoena powers, and straightforward discovery rules and procedures.
  2. There is no preemption, so Uniform Trade Secrets Act (UTSA)-based state law claims remain independently viable. The definition of trade secrets and the test for misappropriation remain largely unchanged from the UTSA.
  3. Ex parte seizures are available on a heightened showing to stop imminent threats and attach assets.
  4. Notice requirements need to be incorporated into new and amended employee agreements to obtain enhanced damages and fees.

Please click on a link below to access webinar materials. (Note: to listen to the full recording you will need to sign-in or register with ON24.)

Presentation Deck [PDF]

Webinar Recording [ON24]

If you have any questions or would like additional information, please contact our team.

 

As we have noted over the past several months, trade secrets will finally obtain additional protection under federal law. Yesterday, April 27, 2016, the House of Representatives passed the Defend Trade Secrets Act of 2016, S. 1890, without amendment. The bipartisan bill passed with a vote of 410-2, sending the bill to the White House for President Barack Obama’s promised signature.

As the White House stated on April 4th of this year:

“The Administration has placed high priority on mitigating and combating the theft of trade secrets, as exemplified in the Administration’s Joint Strategic Plan on Intellectual Property Enforcement, the Administration’s Strategy on Mitigating the Theft of U.S. Trade Secrets, and Executive Order 13694 authorizing sanctions on those who perpetrate cyber-enabled trade secret theft. S. 1890 would provide important protection to the Nation’s businesses and industries, including through the establishment of a Federal civil cause of action for trade secret misappropriation which would effectively build upon current Federal law and various State laws that have largely adopted the Uniform Trade Secrets Act. As such, the Administration strongly supports the Defend Trade Secrets Act of 2016 ….” See Statement of Administration Policy (4/4/16).

As we have explained, the bill would not preempt the state laws, such as the Uniform Trade Secrets Act, which has been adopted with modifications by 48 states and the District of Columbia.  Like the federal Lanham Act, the Defend Trade Secrets Act will co-exist with state-level trade secrets law.

Notably, one of the new features of the federal trade secrets law will be the “Civil Seizure” mechanism by providing federal judges with, among other things, the ability to “appoint a special master to locate and isolate the misappropriated trade secret information and to facilitate the return of unrelated property and data to the person from whom the property was seized.” Additionally, in addition to other unique hallmarks of this federal legislation, the maximum criminal fines for misappropriating a trade secret will now be increased from $5,000,000, to “the greater of $5,000,000 or 3 times the value of the stolen trade secret to the organization.”

A federal civil cause of action for trade secrets misappropriation appears to be quickly becoming reality. Following the lead of the Senate, on Wednesday, April 20, the U.S. House Judiciary Committee approved the Defend Trade Secrets Act of 2015, S. 1890, without amendment. The bipartisan bill will now head to the full House of Representatives for a vote this Wednesday, April 27. The bill is widely expected to pass the House, as a prior House version, H.R. 3326, had more than 150 co-sponsors there. What’s more, the President has already signaled that he will sign the bill should it ever make its way to the Oval Office. We will follow up with any further developments.

Today, the European Parliament approved a Directive that seeks to simplify and harmonize the law on trade secrets throughout the European Union with a vast majority (503 in favor, 131 against and 18 abstentions). The Directive was first proposed in 2013. Although the initial proposal was deliberately kept ‘low profile,’ it was the subject of heated debates up until today’s vote. Certain members of parliament indeed invoked the ‘Panama Papers’ and requested that the vote be suspended until the European Commission would have prepared its proposal specifically dealing with whistleblowers. The vote now goes to the EU Council. As this typically is but a formality, it is likely that the Council will approve the Directive as it reads today. If it does, EU member states will have roughly two years to replace their current patchwork of trade secret law and implement the Directive into national law.

The Directive’s stated intent is to “enhance the competitiveness of European businesses and research bodies” and to “improve the conditions/framework for the development and exploitation of innovation and for knowledge transfer” within the EU. Continue Reading European Parliament Votes for Simple Cross-Border Trade Secret Law

Companies sometimes discover warning signs or clear activity of trade secret theft but do not know how to deal with the issue right away.  Whether it is a current employee who remotely accesses company trade secret information while on vacation, or a departing employee who conveniently failed to return a company laptop, that company may be heading toward eventual trade secret litigation. But the immediate path forward seems unclear and presents so many options of what to do. Because the hours and days after discovery of a potential trade secret theft are extremely important, we suggest a simple set of best practices for responding to that potential trade secret theft: 1) understand the issue, 2) contain the issue, 3) exhaust the issue, and 4) consider bringing the issue to court.

Continue Reading Best Practices for Responding to Potential Trade Secret Theft

Earlier this month, a federal judge ruled that a copycat trade secrets theft claim could not be re-litigated in federal court, having already been dismissed in a state court action. That decision came out of a complex dispute between a stem cell company and its prior President and CEO.

After former CEO Alan Smith left Cognate Bioservices Inc. in 2010, he sued Cognate for wage violations in Maryland state court. Cognate then counterclaimed for misappropriation of trade secrets alleging that Smith failed to return his company computer and passwords and misappropriated Cognate’s trade secrets. Meanwhile, Cognate filed a separate lawsuit in Maryland federal court alleging that Smith violated the Computer Fraud and Abuse Act and misappropriated Cognate’s trade secrets, among other things. Both the state court and federal court actions ran in parallel until May 2014 when the state court action went to a jury trial. The jury found against Cognate on its misappropriation counterclaim. Smith accordingly moved to dismiss the federal suit.

Continue Reading State Trade Secrets Claim Cannot Be Re-Litigated in Federal Court

Last week the United States Senate unanimously approved legislation that would create a private right of action in federal court for trade secret theft. We reported on this legislation — The Defend Trade Secrets Act of 2015 – last summer, and explained how it would modify the Economic Espionage Act (EEA), 18 USC Chapter 90. See The Growing Momentum for Federal Trade Secrets Legislation

Continue Reading U.S. Senate OKs Federal Trade Secret Bill

The momentum for federal trade secrets legislation appears to be growing with last week’s introduction of the “Defend Trade Secrets Act of 2015” in both chambers of Congress. The bill, H.R. 3326 in the House and S. 1890 in the Senate, would create a uniform federal civil action for trade secret misappropriation, which is currently litigated exclusively in state courts and subject to the States’ various laws. Such a uniform federal civil action seeks to eliminate the splits of authority on trade secret law among the States and the resulting uncertainty about enforcement of trade secrets.  While this is not Congress’ first attempt at civil federal trade secret law, the stakes here are high:  it has been reported that publicly traded U.S. companies maintain a combined $5 trillion in trade-secret-related assets, with the annual economic loss attributable to trade secret theft estimated to be between $167 and $503 billion. These staggering numbers, combined with a recent surge in cyber-attacks and trade secret theft, have lawmakers considering the issue anew.

Continue Reading The Growing Momentum for Federal Trade Secrets Legislation