Posted onJuly 18, 2018byHenry Sneath|Comments Off on DTSA (DEFEND TRADE SECRETS ACT) CLAIMS INCREASE DRAMATICALLY IN 2017 AND 2018
FROM DTSALaw®: As we have previously predicted on these pages (and at www.dtsalaw.com ), the number of DTSA lawsuits has risen dramatically in 2017 and the first two quarters of 2018. Lex Machina and IPLaw 360 report that DTSA lawsuits increased from roughly 900 suits to over 1100 in 2018. In the first two quarters of 2018, the number of filings already is 581. The DTSA is still working its way into the legal community’s knowledge base and many practitioners may still be unaware of the most important benefit – of automatic Federal Court jurisdiction for trade secret cases under the 2016 DTSA that involve interstate commerce. The DTSA was signed into legislation as an amendment to the Economic Espionage Act (EEA) and with EEA is a powerful tool in the arsenal of litigation strategies in both the employment and non-employment arenas. Many DTSA claims are part of claims brought to enforce employment restrictive covenants, which restrictive covenant claims themselves are becoming disfavored by the states and their courts. As “non-compete” claims find less favor with the courts, lawyers should look carefully at the DTSA (and EEA) for civil claims that might apply. IPLaw 360 reports as well that only 19 cases filed to date have reached a conclusion on the merits of trade secret misappropriation. Results were essentially evenly split between plaintiffs and defendants. Houston Harbaugh, P.C. (www.hh-law.com) has an aggressive employment and trade secret practice and Pittsburgh is seeing a number of new cases filed in its Western District Pennsylvania Federal Court. DTSALaw® is a registered trademark of Houston Harbaugh, P.C.
Posted by: DTSALAW.Com and DefendTradeSecretsAct.LawyerHenry M. Sneath, Esq. – Chair of the Intellectual Property Practice Group at Pittsburgh, Pa. law firm Picadio Sneath Miller & Norton, P.C. (PSMN® and PSMNLaw®). Mr. Sneath is also an Adjunct Professor of Law at the Duquesne University School of Law teaching Trade Secret Law, Trademark Law and the Law of Unfair Competition. He may be contacted email@example.com or 412-288-4013. See Websites www.psmn.com or www.DTSALaw.com.
The new DTSA federal civil remedy statute is already generating lawsuits being filed in Federal Courts. Two suits were recently filed in the Southern District of Florida with jurisdiction being claimed pursuant to the Defend Trade Secrets Act 2016 (DTSA). One case was also filed in the Northern District of Texas. See links to the cases below. In each Florida case, the plaintiff not only claimed trade secret misappropriation under the DTSA, but also under the Florida UTSA state statute (FUTSA). The Texas case brings claims under DTSA and the TUTSA along with pendent state law claims. This may become the trend as the DTSA and state statutes modeled after the Uniform Trade Secret Act describe trade secrets and misappropriation somewhat differently and provide, in some cases, different remedies. The differences in “definitions” between DTSA and the UTSA are not major, but they may make a difference if either is left out of a complaint filed in federal court. We will monitor this trend and post in the future on new filings.
Interestingly, while both Florida cases seek injunctive relief in the complaint’s claims for relief, neither docket shows the filing of a separate Motion for TRO, Preliminary Injunction or motion for other injunctive relief. The Dean case brings only trade secret misappropriation claims under the DTSA and the FUTSA state statute. The Bonamar case brings claims under DTSA and FUTSA and a number of pendent State Law claims that you would expect to see in an employment related, non-disclosure, breach of covenants/contract case. In the Texas case, the plaintiff has filed an emergency motion for TRO under both state and federal law and a hearing is set for May 26, 2016. The motion and brief are linked below. Here are links to the cases on our website.
Posted by Henry M. Sneath, Esq. – Chair of the Intellectual Property Practice Group at Pittsburgh, Pa. law firm Picadio Sneath Miller & Norton, P.C. (PSMN® and PSMNLaw®). Mr. Sneath is also an Adjunct Professor of Law at the Duquesne University School of Law teaching Trade Secret Law, Trademark Law and the Law of Unfair Competition. He may be contacted firstname.lastname@example.org or 412-288-4013. Website www.psmn.com or www.psmn.law.
Congress is not limiting its intellectual property legislation to just patents. Senators Whitehorse and Graham announced yesterday that they are proposing new legislation to aid US companies in protecting their trade secrets via expanded criminal penalties. While just in a “discussion draft” stage, the proposed legislation includes provisions that “cover foreign-sponsored trade secret theft, that victim companies can weigh in on how to protect trade secrets during criminal prosecutions, and to ensure that foreign hackers that victimize American companies can be held accountable.”
Among its provisions, the proposed legislation would:
expand coverage to prohibit government sponsored hacking
allow owners of the trade secrets more input in cases
clarify that the statute covers trade secret theft that is facilitated by means located in the US
clarify that “foreign instrumentalities” include companies that are substantially subsidized by foreign government entities
expand trade secrets to include negotiating strategies and positions
clarify that liability exists for any knowing conveyance of stolen trade secrets to foreign governments
make trade secret theft a RICO predicate act
The text of the discussion draft can be found here, along with a summary of the key provisions.
There was an interesting article on CNBC yesterday that highlights a popular misconception people have regarding how to protect their ideas and innovations. While people often think of using patents to protect their ideas, the law provides a number of different mechanisms (such as trade secrets) that can often be far more useful and valuable than patents. The article highlights how some of the most valuable intellectual property in the world, such as the Dr. Pepper formula, KFC’s “Secret Recipe of 11 Herbs and Spices,” and the formula for WD-40, is not patented, but is instead protected as a trade secret.
Both patents and trade secrets provide important protections for an individual’s or company’s innovations, but they protect them in very different ways. Patents generally entitle an inventor to the exclusive right to make, use, and sell the invention described in the claims of the patent for a 20-year period from the date the patent application is filed. As part of the quid pro quo for obtaining this government-sanctioned exclusive right, the inventor must describe how to make or use his or her invention in sufficient detail that a person in that field would be able to make or use the invention without significant difficulties. Once that 20-year period expires, anyone is free to use that invention.
Trade secrets, on the other hand, potentially can last forever and the law will prevent others from improperly taking or using the invention, as long as the individual or company takes sufficient steps to keep the invention secret. Thus, a former employee who happens to know the secret will not be allowed to make the product in competition with the inventor, or a competing company cannot use industrial espionage to steal the secret. The law does not prevent another from using the secret if the person independently and lawfully discovers the same invention on his or her own, though. It only protects the inventor from others who have improperly discovered or used the secret.
From these brief descriptions, it is clear that patents better protect some kinds of inventions, while keeping the invention a trade secret may better protect others. For instance, it may make more sense to consider patenting the invention when the innovative aspect of an invention is readily seen simply by looking at a product (such as with a paper clip or a pop-top soda can). The law will protect the inventor from anyone else making or selling the same invention for 20 years, even if that other inventor independently came up with the same idea. Trade secret protection is likely of little to no value in this case, because once the invention is sold, everyone knows what the invention actually is.
On the other hand, inventions such as the Dr. Pepper formula are not easy to determine, even when you have a can of Dr. Pepper in your hands. The precise ingredients and the process by which they are blended are not apparent. This kind of invention lends itself to being kept as a trade secret because the invention is not easily reversed engineered. If Dr. Pepper had chosen the patent route instead, it would only have had an exclusive right to make and sell the soda only for 20 years, after which everyone could make exactly the same product. By protecting it as a trade secret, it potentially can keep its invention a secret forever.
One of the keys with trade secrets is that the inventor must take reasonable and active steps to keep the invention secret. As the article mentions, many of these companies restrict knowledge of the complete formulas or processes to only a handful of individuals and take steps make sure that the products are manufactured in such a way that no one can determine what the recipes are. If an inventor does not take steps to keep his or her invention secret, the law will not do it for him or her.
Obviously, both patent and trade secret law are far more complex than what is discussed here. However, the basic principles are useful to understand so that the right questions can be asked and the right strategies considered when deciding how to protect your secrets and inventions.
With the dawn of the new year, it is time to consider getting your annual checkups. IP assets often form the core assets of a company—enabling the company to provide its goods and services and to prevent others from encroaching on its valuable property. Regardless of the size of your company, maintaining the health of these assets should be a key priority, so a company’s IP portfolio should undergo a routine review to make sure the assets are in top shape and no issues have arisen.
Among the many things that can be done in an IP checkup (or audit) is to determine which assets are currently being used. Are their underutilized assets that should be utilized? Or, can these assets be sold or licensed to someone else? An IP audit can verify that you have the proper title or license to the IP assets you do use and that all maintenance fees have been paid to maintain the enforceability of these assets. An IP audit can not only assess the assets you have, it can serve as preventative medicine to help ward off lawsuits. With the recent plague of false patent marking cases that have been filed throughout the country, verifying that the goods you provide are properly marked and any expired patent numbers have been removed can help avoid needless and expensive litigation.
An IP audit provides the mechanism to obtain a current snapshot of the status of a company’s IP assets. Like any other kind of checkup, an IP audit can range from a broad, general review and inventory of the assets to a detailed analysis of some or all of the assets. Often, the audit begins with the broad review to identify potential problems and then prioritizes which problems to focus on.
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Contact our Pittsburgh Intellectual Property, Data Security, Trade Secret, DTSA and Technology Attorneys at Houston Harbaugh, P.C. through IP Section Chair Henry M. Sneath at 412-288-4013 or email@example.com. Some posts herein were published by the law firm Picadio Sneath Miller & Norton, P.C. (PSMN®) which has merged with HoustonHarbaugh, P.C. and are used by permission. DTSALaw® is a federally registered trademark. See Firm Website at: www.hh-law.com