March 30, 2016 www.insidecounsel.com either organize affairs in different ways in different states or risk losing trade secret protection; (b) subject mobile employees to greater risks of litigation for materials that may or may not qualify as trade secrets, depending on the jurisdiction; (c) encourage forum shopping and races to the courthouse for cases that might best be settled out of court; and (d) inject additional uncertainty into litigation due to choice-of-law questions. The Uniform Trade Secrets Act (“UTSA”), published in 1979 and amended in 1985, was intended to accomplish the same goal of uniformity. But the UTSA was not adopted by every state, and states that adopted the UTSA did so with their own wrinkles. For example, state laws vary as to which statutes of limitations apply, whereas the DTSA would create a uniform three-year statute of limitations from the date the theft was, or reasonably should have been, discovered. State laws also vary as to whether courts can enjoin an employee who knows a trade secret from taking a similar position at another company under the theory that such employment will lead to “inevitable disclosure.” The DTSA, as currently constituted, would not permit injunctions based merely on the information known by a departing employee. Second, DTSA proponents argue that federal courts can streamline discovery; more readily facilitate service of defendants and witnesses in various locations; and, perhaps, more effectively prevent foreign parties from leaving the United States. Third, the DTSA empowers federal courts, after an ex parte hearing, to seize stolen trade secrets to prevent their dissemination.

Trade secret owners see this as a critical step to avoid, or mitigate harm. Part III of this series will examine in depth how companies can leverage this powerful tool. The DTSA’s Perceived Limitations Opponents of the bill have raised several objections. As an initial matter, the DTSA may not enhance uniformity, because it does not preempt state law, but runs concurrently, such that the federal regime could merely add another layer of interpretation onto current approaches to trade secret law, and raise thorny jurisdictional questions.

Much of the current variability in trade secret cases stems not from trade secret law itself, but rather from other legal issues that often arise in trade secret cases, such as the applicability and enforcement of non-compete agreements, which the DTSA does not address. Moreover, a group of prominent law school professors has argued the DTSA (a) fails to explicitly address cyber-espionage; (b) could harm small businesses ill-equipped to litigate a seizure order against a well-funded adversary; and (c) could actually increase short-term uncertainty as federal courts develop, from scratch, a new body of law. Finally, the DTSA’s expansive protection for trade secrets may have the perverse effect of, at the margins, leading fewer companies to seek patents, which benefit innovation in ways trade secrets do not, because patents disclose the state of the art and, eventually, expire. Best Practices While the DTSA may transform the way—and the system in which—trade secrets are litigated, companies can and should protect themselves now by limiting the circle of distribution for proprietary information inside and outside the company; implementing strong non-disclosure policies; and developing physical and electronic safeguards to prevent theft by outsiders and departing employees. These steps are likely to help protect your most vital information, regardless of whether an issue arises under state or, eventually, federal law. ● CONTRIBUTING AUTHORS Anthony M.

Stiegler Partner Phone: +1 858 550 6035 astiegler@cooley.com Adam Gershenson Associate Phone: +1 617 937 2379 agershenson@cooley.com Reprinted with permission from the March 30, 2016 edition of Inside Counsel © 2016 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 or reprints@alm.com.

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