USA Law and Practice Contributed by: Claudia Ray, Joseph Loy, Josh Berlowitz and Andrew (Keum Yong) Lee, Kirkland & Ellis LLP
certain circumstances. The simplest hook for extrater - ritorial application is if the misappropriator is a person who is a citizen or lawful permanent resident of the USA or an organisation that is organised under the laws of the USA or one of its states. The DTSA may also have extraterritorial reach even if the misappropriator does not meet either criterion, as long as an act in furtherance of the offence was committed in the USA. Courts are just beginning to grapple with the contours of extraterritorial applica - tion of the DTSA, so the precise parameters are not entirely clear. So far, they have been willing to apply the DTSA to misappropriation occurring overseas based on “acts in furtherance” that occurred in the USA, including the marketing of products embody - ing the stolen trade secrets at trade shows within the USA and travel to the USA for the purpose of hir - ing a competitor’s engineers. See Motorola Solutions Inc v Hytera Communications Corp , 436 F Supp 3d 1150, 1157–66 (N.D. Ill. 2020); Micron Technology Inc v United Microelectronics Corp , 2019 WL 1959487, at *3–4 (N.D. Cal. May 2, 2019). On the other hand, loss of domestic revenues from entirely extraterritorial activity may not alone be suf - ficient to bring alleged misappropriation within the reach of the DTSA. See Luminati Networks Ltd v BIS- cience Inc , 2019 WL 2084426, at *9–10 (E.D. Tex. May 13, 2019). The ability of domestic trade secret owners to redress theft by foreign companies and those in their employ will therefore depend greatly on the facts of each particular case. 2. Misappropriation of Trade Secrets 2.1 The Definition of Misappropriation The DTSA and UTSA both define misappropriation as the “acquisition of a trade secret of another by a per - son who knows or has reason to know that the trade secret was acquired by improper means or disclosure or use of a trade secret of another without express or implied consent” (18 USC Section 1839 (5); UTSA Section 1 (2)). Improper means include “theft, bribery, misrepresen - tation, breach or inducement of a breach of a duty
to maintain secrecy, or espionage through electronic or other means”, but do not include lawful means of acquisition such as reverse engineering or independ - ent discovery (18 USC Section 1839 (6); UTSA 1 (1)). New York In New York, misappropriation requires “that the defendants used that trade secret in breach of an agreement, confidential relationship or duty, or as a result of discovery by improper means”. N. Atl. Instruments, Inc v Haber , 188 F.3d 38, 43-44 (2d Cir. 1999). Acquisition of a trade secret alone, therefore, may be insufficient to support a claim. See Kind Ops, Inc v AUA Private Equity Partners , LLC, 150 N.Y.S.3d 246 (1st Dep’t 2021) (“The complaint fails to state a cause of action for misappropriation of trade secrets because it does not allege that AOG made use of the confidential information”.). 2.2 Employee Relationships There is an implied confidential relationship between employers and employees, such that the employee is obligated not to disclose the employer’s confidential information (Restatement (Third) of Unfair Competition Section 42, Comment b (1995)). Disclosing a trade secret to employees does not typi - cally constitute public disclosure resulting in the termi - nation of the trade secret, given that employees have a fiduciary duty to maintain the secrecy of the trade secret. Even if there is no express contractual term in an employment agreement prohibiting the employee from disclosing the trade secret, the employee still has an implied duty to maintain the secrecy of the trade secret. If, however, the trade secret is disclosed to employees who do not need knowledge of it in order to perform their jobs, and precautions (such as the signing of non- disclosure agreements with employees) are not taken to prevent those employees from disclosing the trade secret, then trade secret protection may be terminated – eg, In re Island Indus., Inc, 2024 WL 869858, at *4 (6th Cir. Feb. 29, 2024). Thus, it is a beneficial precau - tion to require an employee, in express contractual terms, not to disclose the employer’s trade secrets.
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