Trade Secrets

What Are Trade Secrets?

Under the Defend Trade Secrets Act (DTSA) of 2016, a trade secret is defined in a way that is consistent with the definition given in the Uniform Trade Secrets Act (UTSA) adopted by many states. According to the DTSA, a trade secret is information that:

• Is not generally known to the public. If the information is easily ascertainable or generally known within an industry, it cannot be considered a trade secret.
• Derives economic value from being secret. The information must give the owner a competitive advantage or potential for economic gain that it would not have if the information were generally known.
• Is the subject of reasonable efforts to maintain its secrecy. The owner must take reasonable steps to protect the information, such as requiring confidentiality agreements with employees or others who have access to it.

The type of information that can qualify as a trade secret under the DTSA is broad and includes financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes. This can include information whether it is stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing.

Overall, the DTSA provides robust protections for trade secrets and allows businesses to sue in federal court for trade secret misappropriation. This makes the DTSA a powerful tool for businesses to protect their valuable proprietary information.

What Is The Uniform Trade Secrets Act (UTSA)

The Uniform Trade Secrets Act (UTSA) is a piece of legislation developed by the Uniform Law Commission in the United States in 1979 to provide a legal framework for the protection of trade secrets, such as formulas, patterns, compilations, programs, devices, methods, techniques, or processes. The main aim of the UTSA was to harmonize the various state laws concerning trade secrets, as laws varied widely from state to state before its adoption.

The UTSA provides for legal remedies in the event of misappropriation of a trade secret, including injunctions and damages. Misappropriation generally involves the acquisition of a trade secret by someone who knows or has reason to know that the trade secret was acquired by improper means (such as theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means), or the disclosure or use of a trade secret without consent by a person who used improper means to acquire knowledge of the trade secret.

Illinois Trade Secrets Act – 765 ILCS 1065

The Illinois Trade Secrets Act (ITSA), like other states’ trade secrets acts, is modeled after the Uniform Trade Secrets Act (UTSA), which provides a generally accepted framework for understanding what constitutes a trade secret.

Under the Illinois Trade Secrets Act, a trade secret is defined as information, including but not limited to, technical or non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, or list of actual or potential customers or suppliers, that:

• Is sufficiently secret to derive economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use; and
• Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality.

This definition is purposefully broad and flexible, allowing for a wide array of information to potentially be protected as trade secrets. It’s important to note that the value of the information comes from its secrecy, and the owner must take reasonable measures to maintain its secrecy.

This can include various forms of information such as business plans, customer lists, manufacturing processes, research and development information, marketing strategies, and many others, provided they meet the above criteria.

It is also important to mention that a violation of the ITSA can lead to various remedies including injunctions, compensatory damages, punitive damages, and attorney’s fees under certain circumstances.

Brief Overview of Trade Secret Litigation in the United States

Trade secret litigation in the United States often arises when a business believes that its trade secrets, such as formulas, patterns, compilations, programs, devices, methods, techniques, or processes, have been misappropriated. This can happen in a variety of ways, including through theft, bribery, misrepresentation, breach of a duty to maintain secrecy, or espionage. Given the significant value that these trade secrets can hold, businesses will often go to great lengths to protect them.

Trade secret disputes can involve a wide range of issues and legal arguments, but they typically hinge on whether the information at issue is actually a trade secret and whether it was improperly acquired or disclosed. Additionally, they may involve issues of whether the defendant had a duty to maintain the secrecy of the trade secret and whether they breached that duty.

At the federal level, trade secret litigation is governed by the Defend Trade Secrets Act (DTSA), which was enacted in 2016. This law provides federal jurisdiction for trade secret theft, allowing parties to sue in federal court regardless of the amount in controversy. The DTSA does not preempt or displace the state laws, but rather it provides an additional layer of potential protection.

Under the DTSA, an owner of a trade secret that is misappropriated may bring a civil action if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce. The DTSA allows for injunctions and damages for actual loss and any unjust enrichment caused by the misappropriation of a trade secret. In exceptional circumstances, it may also provide for an ex parte seizure order to prevent the propagation or dissemination of a trade secret.

On the state level, many trade secret actions are governed by the Uniform Trade Secrets Act (UTSA), which has been adopted, with variations, by most states. The UTSA similarly provides for injunctive relief and damages.

Contact Our Chicago Business Attorneys

In today’s competitive business environment, your trade secrets are one of your most valuable assets. They are a key component of your company’s unique value proposition and a critical factor in your long-term success. However, as the digital landscape becomes increasingly complex, ensuring the confidentiality and security of these secrets can present significant challenges. If you’re facing a trade secret issue or simply wish to take proactive steps to secure your proprietary information, we strongly encourage you to reach out to us. The stakes are high, and prompt action can often make the difference in maintaining the competitive edge your business enjoys.

In a trade secret lawsuit, it is often crucial to act quickly and decisively, as the value of a trade secret can be quickly lost if it becomes widely known. For this reason, businesses are often well-advised to consult with experienced legal counsel as soon as they suspect that a trade secret has been misappropriated.