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1 1 (January 27, 2023)

handle is hein.crs/govekju0001 and id is 1 raw text is: Congressional Research Service informing the legislative debate since 1914 0 January 27, 2023 An Introduction to Trade Secrets Law in the United States Trade secrets-a form of intellectual property comprising many kinds of confidential information-are widely considered to be important assets for U.S. companies and the U.S. economy as a whole, with examples as varied as search engine algorithms and soft drink formulas. Congress and the states have enacted laws to protect trade secrets, and federal and state courts see a steady stream of trade secrets cases, with more than a thousand filed annually in U.S. district courts in recent years. Although historically protected mostly by state law, trade secrets have more recently come under the protection of federal civil and criminal laws. Members proposed several bills concerning trade secrets in the 117th Congress, largely in an effort to address the potential risk of trade secret theft by foreign governments and agents. This In Focus provides an overview of how trade secrets are defined and protected under U.S. law and discusses selected legislation introduced in the 117th Congress. What Are Trade Secrets? Legal Definition State and federal laws generally provide that trade secrets may encompass many types of information, including formulas, patterns, compilations, programs, devices, methods, techniques, and processes. To constitute a trade secret, such information must meet two criteria: * First, the information must derive economic value from not being known or readily ascertainable by other persons. In other words, a trade secret derives its value-for instance, giving its owner a competitive advantage-from the fact that others cannot easily discover it. * Second, the owner must keep the information secret using measures that are reasonable under the circumstances. Such protective measures may involve, for example, restricting access to the information to specific individuals on a need-to-know basis, including limiting physical access to company facilities and files; requiring employees to sign nondisclosure agreements; and securing computer networks. Differences Between Trade Secrets and Patents Trade secrets may include, but are not limited to, the types of inventive discoveries that are eligible for U.S. patent protection. For example, the inventor of a new type of manufacturing equipment-or a new way to use such equipment-might have a choice either to apply for a patent on the invention or to maintain it as a trade secret. One advantage of patent protection is that, unlike trade secrets, a patent gives its owner a monopoly that competitors cannot legally circumvent by reverse-engineering or independently discovering the invention. On the other hand, patents require public disclosure of the invention and expire after a certain time-typically, about 20 years-whereas trade secrets may be maintained indefinitely. Trade secrets may also encompass certain financial or business information that is not patentable, such as supplier lists. The relatively broad scope of potential trade secret (as compared with patent) protection may have taken on greater importance in light of a line of Supreme Court decisions that further restricted the types of inventions that may be patented, including in the software and biotechnology fields. See CRS Report R45918, Patent-Eligible Subject Matter Reform: Background and Issues for Congress. What Laws Protect Trade Secrets? Trade secrets are protected by a combination of state and federal laws, which prescribe a combination of civil and criminal penalties for trade secret misappropriation-the improper acquisition, disclosure, or use of a trade secret. State Laws State laws generally allow trade secret owners to sue and obtain damages or injunctive relief for trade secret misappropriation. In most states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, these civil suits are governed by the Uniform Trade Secrets Act (UTSA), a statute first published in 1979 and then enacted, with some variation, on a state-by-state basis. The only states that have not yet adopted UTSA are North Carolina, which has enacted a similar statute, and New York, where trade secret misappropriation claims are governed by common law. Although state courts generally have jurisdiction over UTSA claims, plaintiffs may file certain UTSA lawsuits in U.S. district courts. As with many other kinds of civil suits, plaintiffs may file standalone UTSA claims in federal court if the requirements for diversity jurisdiction are met-i.e., the plaintiff and defendant are citizens of different states, and the lawsuit seeks more than $75,000 in damages. A defendant also has the right to remove (i.e., transfer) such a lawsuit from state to federal court if the diversity jurisdiction requirements are met and the defendant is not a citizen of the forum state. Defend Trade Secrets Acts In 2016, Congress passed the Defend Trade Secrets Act (DTSA) to create a new civil right of action for trade secret misappropriation under federal law. DTSA does not replace state laws such as UTSA, but rather creates a parallel right for plaintiffs to file trade secret misappropriation lawsuits in federal court if the trade secret is related to a product or service used in ... interstate or foreign commerce.

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