Trade Secrecy Rising | Patently-O

by Dennis Crouch

A continuing trend in American law is the rise of Trade Secrecy as a powerful form of intellectual property.

The FTC and Biden Administration have called for eliminating employee non-compete agreements, which will strengthen the hard push for trade secrecy.  Most trade secret claims involve former employees moving to competitors.  If contracts limiting those transitions are unenforceable, more weight will almost certainly fall on trade secrecy rights.

Recently, President Biden also signed into law the Protecting American Intellectual Property Act of 2022.  Despite its broad name, the new law focuses entirely on international trade secrecy issues.  In particular, the law authorizes the US President to place sanctions on foreign entities that engage or benefit from “significant theft of trade secrets of United States persons.”   The law has a two-step approach: (1) the President must provide Congress with a report of violators; and (2) the President must then put sanctions on the violators (with the exception that sanctions can be waived if in the national interest).  Potential sanctions include blocking and prohibiting “all transactions in all property and interests in property of the entity.”

The new law is set to Sunset in 7 years and so will not be codified within the United States Code (USC).  However, the law does rely upon the DTSA definition of trade secret found in 18 U.S.C. 1839:

[T]he term “trade secret” means all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if— (A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.

Under Federal Law, the theft of trade secrets held by US persons for the purpose of taking information out of the US is also a felony. See, Economic Espionage Act.

But, for the most part the practice of trade secrecy law is radically different than that of patent law.  I’m wondering the extent that patent attorneys are engaging in the transition.