Trade secret theft is a major issue currently plaguing U.S. businesses. Recent PwC research shows that the estimated value of trade secret theft in the United States is roughly 1-3% of the country’s annual GDP. In addition, 1,134 trade secret theft cases were filed in 2017—the highest such figure over the past decade. Until 2016, there was no opportunity for companies to directly sue defendants for trade secret misappropriation in federal courts. Although all states except New York have adopted the Uniform Trade Secrets Act (UTSA), state legislatures have adopted it in different flavors. This left companies affected by trade secret theft vulnerable to inconsistent rules, uneven case precedent, and unpredictable trial outcomes if they opted to directly sue for civil damages. The Defend Trade Secrets Act (DTSA) changed this. By amending the Economic Espionage Act (EEA), Congress gave trade secret owners the ability to sue trade secret violators directly for misappropriation under a uniform legal standard without passing their cases on to prosecutors.
The DTSA protects a wide variety of business, economic, engineering, and other proprietary secrets—so long as the secrets themselves derive their value from not being disclosed, and their owners took reasonable steps to keep them secret. The law targets activities that amount to misappropriation. This occurs when the trade secret at issue was acquired by another individual who knows or has reason to know that it was improperly acquired. It also sanctions instances where a violator disclosed or used the trade secret without the owner’s prior consent. For this to apply, the individual must have obtained the secret through improper means, possessed it under circumstances that gave rise to a duty to protect or limit use of the trade secret, or received it from someone who had a similar duty. The DTSA is one of the few federal regulations that does not preempt state law. Therefore, it’s important to weigh your options between suing for misappropriation under state law or under the DTSA.
Trade secret owners who have been impacted by misappropriation can sue for damages within three years from the date the trade secret owner either knew about the incident or should have known about the violation after conducting a reasonable inquiry. The law allows trade secret owners to request the civil seizure of any property necessary for propagating or disseminating the trade secret, along with injunctive relief or damages for actual loss and unjust enrichment. In extreme scenarios, trade secret owners can receive financial compensation in the form of reasonable royalties that would have applied had the violator licensed usage of the trade secret. Owners could also receive double damages for exemplary damages and attorney’s fees if the misappropriation was willful, intentional, or otherwise involved bad faith conduct.
Companies are only entitled to relief under the DTSA if they’ve taken reasonable steps to keep their trade secrets secret. With managed virtual cloud hosting, you’re able to accomplish this without the expense and hassle of installing servers or hiring dedicated staff. Abacus Private Cloud can help you store your trade secrets in compliance with DTSA store your organization’s proprietary trade secrets in an encrypted environment bolstered by three layers of physical, server, and data security.