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.

 

The Texas Supreme Court on Friday issued its first decision interpreting the recently enacted Texas Uniform Trade Secrets Act (TUTSA), holding that a defendant’s corporate representative does not have an absolute right to remain in the courtroom while a plaintiff’s trade secrets are discussed.  In re M-I L.L.C. d/ba/ MI-Swaco, No. 14-1045 (Tex. Jan. 13, 2016).  The Court’s decision is significant both because it is the first time the Texas Supreme Court has addressed the relatively new legislation (TUTSA was passed in late 2013), but also because its signals the Court’s willingness to interpret TUTSA expansively.

Continue Reading Texas Supreme Court Issues First Texas Uniform Trade Secrets Act Decision

Another court has rejected the broader interpretation of the Computer Fraud and Abuse Act (“CFAA” or “the Act”) as applying to employees who exceed their authorized use.  A recent decision in Minnesota highlights the issue of whether the Act imposes civil liability on employees who have permission to access their employers’ data, but do so with a wrongful purpose.  See TripleTree, LLC v. Walcker No. 16-609, 2016 WL 2621954 (D. Minn. May 6, 2016).

The court considered this question in the context of a trade secrets case.  A former employee of TripleTree, an investment banking company, was discovered to have accessed the Company’s confidential information and to have engaged in a series of suspicious activities just prior to leaving the Company for a competitor.  Id. at *1.  TripleTree filed claims against its former employee for, among other things, violating the CFAA and the Minnesota Uniform Trade Secrets Act.  Id. at 2. 

The court sua sponte considered whether it should dismiss TripleTree’s CFAA claim.  Id. at *3.  The CFAA sanctions a person who “intentionally accesses a computer without authorization or exceeds authorized access, and thereby obtains  . . . information from a protected computer.”  18 U.S.C. § 1030(a)(2)(c).  Any person who suffers from a violation of the Act may bring a civil claim for damages.  18 U.S.C. § 1030(g).  As an employee of TripleTree, the Defendant was permitted to access the Company’s confidential information.  The court considered whether the Defendant’s malicious intent in accessing the information transformed an otherwise lawful act (using the Company’s computers) into a violation of the CFAA.

Continue Reading Recent Case Highlights Circuit Split on Important Computer Fraud and Abuse Act Question

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

Capitol Dome

On Monday April 4, after remarks from the bill’s sponsors Orrin Hatch (R) Utah and Christopher Coons (D) Delaware, the Senate voted 87-0 in favor of the Defend Trade Secrets Act of 2015, S. 1890. As we have previously reported, the Act will create a federal civil cause of action for trade secrets misappropriation, which includes an ex parte seizure provision. The next hurdle for the creation of a federal civil action for trade secrets misappropriation, which as Senator Hatch pointed out is the only intellectual property tort for which there is not a federal remedy, is the House of Representatives. If the House passes its version of the bill, H.R. 3326, President Obama is expected to sign the bill into law.

Tort claims of trade secret theft, fraud, unfair competition, tortious interference with contract, and civil conspiracy can fall within the scope of an overly broad arbitration clause. Medversant Technologies, LLC v Leverage Health Solutions, LLC, et al., 114 F. Supp. 3d 290 (E.D. Pa. 2015). In this case, the district court looked “not to the labels or legal theories attached to the claims,” but rather “focused on the factual underpinnings of the claim” when assessing whether these claims fell within the scope of the arbitration clause of a business development and marketing consulting agreement.  Id. (citing CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165 , 173 (3d Cir.2014)).

In this case, the plaintiff (“Medversant”) hired the defendant (“Leverage”) to provide Continue Reading Beware of a Broad Arbitration Clause

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