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Frontline: Defend Trade Secrets Act Gives Added Protection for Tech Companies

The Defend Trade Secrets Act (DTSA), signed into law in May, 2016 by President Obama, has received wide industry praise from manufacturers as well as industry trade organizations.

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The Defend Trade Secrets Act (DTSA), signed into law on May 11, 2016 by President Obama, has received wide industry praise from manufacturers including Boeing, Caterpillar, Corning, Eli Lilly and Co., General Electric, Honda, IBM, Intel, Johnson & Johnson, Procter & Gamble, Siemens, Microsoft, and United Technologies, as well as organizations such as the Alliance of Automobile Manufacturers, the Software & Information Industry Association (SIIA), the National Association of Manufacturers (NAM), and the U.S. Chamber of Commerce.

Matt Lavoie, spokesman for Caterpillar, says, “Caterpillar has publicly supported the act, having sent numerous letters to Congress. We feel it’s important to protect intellectual property for companies like Caterpillar.”

And NAM writes, “Trade secrets are vital to the competitiveness of companies throughout our economy, and the threat to these innovations is becoming more serious and more complex. By creating a strong, uniform body of trade secrets law nationwide, the DTSA ensures that our laws keep pace.”

Government officials point out that trade secrets are worth $5 trillion to the U.S. economy, and losses can cost between $160 billion and $480 billion a year. Government data further points out that trade secrets comprise as much as 80 percent of the value of a company’s knowledge portfolio. Trade secrets are vital to the competitiveness of companies throughout our economy, and the threat to these innovations is becoming more serious and more complex. By creating a strong, uniform body of trade secrets law nationwide, the DTSA ensures that our laws keep pace.

DTSA, which extends the Economic Espionage Act of 1996, essentially gives trade secret owners the option of using federal law to file trade secret lawsuits. Prior to DTSA, only state law authorized these lawsuits. Many see DTSA as critical given the growing rise in trade secret theft from foreign hackers, nation states, and rogue employees interested in obtaining U.S. businesses’ trade secrets.

Jule Sigall, assistant general consul of IP Policy and Strategy for Microsoft, points out that prior to DTSA owners of copyrights, patents, and trademarks could go to federal court to protect their property and seek damages when their property was infringed upon, but trade secret owners could not.

Importance to Technology Companies
Unlike patents, which give a set of exclusive rights to an inventor or assignee for a limited period of time in exchange for detailed public disclosure of an invention, trade secrets are not necessarily technical, but can be anything of commercial value that is not public.

Sigall stresses that trade secrets are especially important today for technology companies, big and small. “Consider Microsoft’s Cortana, for example, which is our personal digital assistant,” he writes in a blog. “Behind Cortana sits a vast amount of technology developed or enhanced in-house by Microsoft — voice recognition; language translation; reactive and predictive algorithms that can synthesize context, location and data, and interface with the vast resources of the Bing search engine index; and a complex array of cloud servers to crunch and serve data in real time. This technology represents tens of thousands of hours of research, trial and error, and continued improvement as Cortana is adapted for new devices and new scenarios.”

Another important aspect to DTSA is how it impacts hiring practices. Employees cannot be prevented from working for competitors due to their knowledge of trade secrets. Conditions on employment, however, must be tailored to the threatened misappropriation. An example: bakery-café chain Panera sued pizza chain Papa John’s, claiming its former head of IT was using Panera’s trade secrets to facilitate small orders and catering in his new employment with Papa John’s.

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