USA Law and Practice Contributed by: Claudia Ray, Joseph Loy, Brandon R. Weber and Andrew (Keum Yong) Lee, Kirkland & Ellis LLP
1. Legal Framework 1.1 Sources of Legal Protection for Trade Secrets In the USA, trade secrets are protected by the following: • 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 protection, 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 adopted 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 simultaneously 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. 1.2 What Is Protectable as a Trade Secret In general, a trade secret consists of com - mercially 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 common knowledge. Under the DTSA, a trade secret includes “ all forms and types of financial, business, scientific, technical, economic, or engineering information ” (18 USC Section 1839(3)). Under the UTSA, a trade secret is information in the form of a “ formula, pattern, compilation, pro- gram, device, method, technique, or process ” (UTSA Section 1(4)). Under the common law, a trade secret is “ any formula, pattern, device or compilation of infor- mation 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). 1.3 Examples of Trade Secrets Examples of a trade secret under the DTSA and state trade secret laws modelled after the UTSA include: • marketing and advertising research (Whyte v Schlage Lock Co, 101 Cal. App. 4th 1443, 1455–56 (2002)); • process and manufacturing technologies (see the foregoing reference); • formulas and methods (see the foregoing reference); • cost- and pricing-related information (Walker Mfg, Inc v Hoffmann, Inc, 261 F. Supp. 2d 1054, 1080 (N.D. Iowa 2003)); • business plans and information, sales strategies and financial information (Avery Dennison Corp v Kitso - nas, 118 F Supp 2d 848, 854 (S.D. Ohio 2000)); • source code (Wellogix, Inc v Accenture, LLP, 716 F 3d 867, 875 (5th Cir. 2013)); • internal design and software architecture documents (TouchPoint Solutions, Inc v Eastman Kodak Co, 345 F Supp 2d 23, 28 (D. Mass. 2004)); and
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