USA Law and Practice Contributed by: Claudia Ray, Joseph Loy, Josh Berlowitz and Andrew (Keum Yong) Lee, Kirkland & Ellis LLP
Kirkland & Ellis LLP 601 Lexington Avenue New York, NY 10022 USA Tel: +1 212 446 4800 Fax: +1 212 446 4900 Email: claudia.ray@kirkland.com Web: www.kirkland.com
1.2 What Is Protectable as a Trade Secret In general, a trade secret consists of commercially valuable information that is valuable because of its secrecy. A trade secret also has to satisfy a minimum standard of novelty to avoid being unprotected com - mon knowledge. Under the DTSA, a trade secret includes “all forms and types of financial, business, scientific, techni - cal, economic, or engineering information that (A) the owner thereof has taken reasonable measures to keep such information secret; and (B) … derives independ - ent economic value, actual or potential, from not being generally known to, and not being readily ascertain - able through proper means by, another person who can obtain economic value from the disclosure or use of the information” (18 USC Section 1839 (3)). Under the UTSA, a trade secret is information in the form of a “formula, pattern, compilation, program, device, method, technique, or process that: Derives independent economic value, actual or potential, from not being generally known to, and not being read - ily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and is the subject of efforts that are reason - able under the circumstances to maintain its secrecy” (UTSA Section 1 (4)). Under the common law, a trade secret is “any for - mula, pattern, device or compilation of information which is used in one’s business, and which gives [the business] an opportunity to obtain an advantage over competitors who do not know or use it” (Restatement of Torts Section 757, Comment b).
1. Legal Framework 1.1 Sources of Legal Protection for Trade Secrets In the USA, trade secrets are protected by the fol - lowing: • federal trade secret law – the Defend Trade Secrets Act (DTSA); • individual state laws modelled after the Uniform Trade Secrets Act (UTSA); and • common law protection in New York, which is the only state that has not yet adopted a version of the UTSA. Prior to adopting some variation of the UTSA, most states had relied on common law trade secret protec - tion, which was summarised in Restatement of Torts Section 757. In 1979, the UTSA was promulgated by the Uniform Law Commission (ULC) as a model act that each state could use as a template for enacting its own trade secret legislation. In 1985, the UTSA was significantly amended to resolve issues with the 1979 version and better align it with the variations adopt - ed by the states. In 2016, the DTSA was passed to enhance federal protection of trade secrets. An individual or corporate entity may bring claims under the DTSA and a state’s trade secret law simul - taneously because the DTSA does not pre-empt state trade secret laws. The UTSA, however, contains a pre-emption clause that displaces common law trade secret causes of action.
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