Uniform Trade Secrets Act
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The Uniform Trade Secrets Act (UTSA), published by the
Uniform Law Commission The Uniform Law Commission (ULC), also called the National Conference of Commissioners on Uniform State Laws, is a non-profit, American unincorporated association. Established in 1892, the ULC aims to provide U.S. states (plus the Washington, D. ...
(ULC) in 1979 and amended in 1985, is a
Uniform Act In the United States, a uniform act is a proposed State law (United States), state law drafted and approved by the Uniform Law Commission (ULC), also known as the National Conference of Commissioners on Uniform State Laws (NCCUSL). Federalism i ...
promulgated for adoption by states in the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of 50 U.S. state, states, a Washington, D.C., ...
. One goal of the UTSA is to make the state laws governing
trade secret Trade secrets are a type of intellectual property that includes formulas, best practice, practices, business process, processes, designs, legal instrument, instruments, patterns, or compilations of information that have inherent economic value be ...
s uniform, which is especially important for companies that operate in more than one state. Historically, the law governing
misappropriation In law Law is a set of rules that are created and are law enforcement, enforceable by social or governmental institutions to regulate behavior,Robertson, ''Crimes against humanity'', 90. with its precise definition a matter of longstan ...
of trade secrets developed separately in each state. Of course, achieving the goal of uniformity depends upon the number of states that choose to adopt it. , the UTSA has been enacted by 48 states, the
District of Columbia ) , image_skyline = , image_caption = Clockwise from top left: the Washington Monument and Lincoln Memorial on the National Mall, United States Capitol, Logan Circle (Washington, D.C.), Logan Circle, Jefferson Memoria ...
,
Puerto Rico Puerto Rico (; abbreviated PR; tnq, Boriken, ''Borinquen''), officially the Commonwealth of Puerto Rico ( es, link=yes, Estado Libre Asociado de Puerto Rico, lit=Free Associated State of Puerto Rico), is a Caribbean island and Unincorporated ...
, and the U.S. Virgin Islands. As with other Uniform Acts, some states have modified language in their version of the statute.


Motivation

A prefatory note to the UTSA states some original motivations for the act: The UTSA made note of the commercial value and competitive advantages inherent in trade secrets. Unlike
patent A patent is a type of intellectual property that gives its owner the legal right to exclude others from making, using, or selling an invention for a limited period of time in exchange for publishing an sufficiency of disclosure, enabling disclo ...
protection, which was addressed at the federal level, trade secret misappropriation was addressed at the
state State may refer to: Arts, entertainment, and media Literature * ''State Magazine'', a monthly magazine published by the U.S. Department of State * The State (newspaper), ''The State'' (newspaper), a daily newspaper in Columbia, South Carolina, U ...
level. In the United States there existed a prevalence of interstate commercial transactions that extended beyond the
jurisdiction Jurisdiction (from Latin 'law' + 'declaration') is the legal term for the legal authority granted to a legal entity to enact justice. In federations like the United States, areas of jurisdiction apply to local, state, and federal levels. Jur ...
of individual state legislation. For example, goods may have been manufactured in State A, warehoused in State B, sold from State C, and delivered in State D. As a result, the UTSA sought to alleviate the uneven development and "uncertainty concerning the parameters of trade secret protection" by recommending a uniform trade secret law and, at the same time, allowing the states the flexibility to meet local circumstances by modifying the text as enacted in each state. In addition to providing some recourse for any uncertainty associated with a patent, the UTSA also serves to codify the
common law In law, common law (also known as judicial precedent, judge-made law, or case law) is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written opinions."The common law is not a brooding omnipres ...
remedies that have emerged in many states. These remedies are based on legal precedent set by previous cases, and therefore allow for greater uncertainty, particularly in less industrial states where there have been fewer trade secret cases. The UTSA notes that any confusion caused by having strictly common law remedies to trade secret misappropriation was exacerbated by omitting trade secret rules from the second edition of the Restatement of Torts.


Overview

The UTSA contained a prefatory note followed by 12 sections of proposed law. Each section was followed by a "comments" section that provided clarifications and examples as to the intent of the law. Section 1 presented definitions of key terms as they are used throughout the act. Sections 2–4 provided remedies for potential wrongs committed in violation of the act, including
injunctive relief An injunction is a legal remedy, legal and equitable remedy in the form of a special court order that compels a party (law), party to do or refrain from specific acts. ("The United States courts of appeals, court of appeals ... has exclusive ju ...
,
damages At common law, damages are a legal remedy, remedy in the form of a money, monetary award to be paid to a claimant as compensation for loss or injury. To warrant the award, the claimant must show that a breach of duty has caused foreseeable loss. ...
and
attorney's fee Attorney's fee is a chiefly United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of ...
s. Sections 5–12 made additional provisions related to the implementation of the law, and the relationship to other laws.


Key definitions

The UTSA provided several definitions of terms as they are used throughout the act. Some of these definitions are replicated here for the benefit of the reader. Although not included in the definition itself, the original text of the UTSA provided clarification regarding the definition of proper and improper means. The comments refined the definition by listing several ''proper'' means of
discovery Discovery may refer to: * Discovery (observation), observing or finding something unknown * Discovery (fiction), a character's learning something unknown * Discovery (law), a process in courts of law relating to evidence Discovery, The Discovery ...
, including discovery by independent invention,
reverse engineering Reverse engineering (also known as backwards engineering or back engineering) is a process or method through which one attempts to understand through deductive reasoning how a previously made device, process, system, or piece of software accompli ...
, licensing arrangement, and published literature. The comments also clarified that improper means included actions that were, "improper under the circumstances; e.g., an airplane overflight used as aerial reconnaissance to determine the competitor's plant layout during construction of the plant". The UTSA noted that the types of accidents or mistakes that would lead to use of a learned trade secret being misappropriated did not include actions or mistakes that "constitute a failure of efforts that are reasonable under circumstances to maintain its he trade secret'ssecrecy". The UTSA also provided refinement through comments to the definition of a trade secret itself: *Multiple parties may hold rights to the same trade secret, as they may all individually derive value from it. *A trade secret ceases to exist when it is common knowledge within the community in which it is profitable. This means that the secret does not need to be known by the general public, but only throughout the industry that stands to profit from it. *A party that reverse engineers a trade secret may also obtain trade secret protection for their knowledge, provided the reverse engineering process is non-trivial. *Knowledge preventing loss of funds, such as that a particular idea does not work, is valuable and as such qualifies for trade secret protection. Regarding reasonable efforts to maintain secrecy, the UTSA maintained that actions such as restricting access to a "need-to-know basis" and informing employees that the information is secret met the criteria for reasonable efforts. The UTSA stated that the courts do not require procedures to protect against "flagrant industrial espionage" were not necessary.


Remedies

The UTSA provided for several potential remedies for wrongs committed under the act, including
injunctive relief An injunction is a legal remedy, legal and equitable remedy in the form of a special court order that compels a party (law), party to do or refrain from specific acts. ("The United States courts of appeals, court of appeals ... has exclusive ju ...
,
damages At common law, damages are a legal remedy, remedy in the form of a money, monetary award to be paid to a claimant as compensation for loss or injury. To warrant the award, the claimant must show that a breach of duty has caused foreseeable loss. ...
, and
attorney's fee Attorney's fee is a chiefly United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country Continental United States, primarily located in North America. It consists of ...
s.


Injunctive relief

Section 2 of the UTSA provided for injunctive relief from trade secret misappropriation. Section 2(a) stipulated, "Actual or threatened misappropriation may be enjoined". However, the length of the injunction was limited to the length of time the trade secret exists (i.e., remains unknown to some party who could profit from knowing the secret) plus sufficient time to eliminate any competitive advantage that could have been obtained by misappropriation of the trade secret. In addition to the possible enjoinment described in section 2(a), section 2(b) allowed for the payment of reasonable
royalties A royalty payment is a payment made by one party to another that owns a particular asset, for the right to ongoing use of that asset. Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset o ...
in place of an injunction under exceptional circumstances. The UTSA, in the comments for section 2, referenced a court case in which a misappropriated trade secret was used to build
military technology Military technology is the application of technology for use in warfare. It comprises the kinds of technology that are distinctly military in nature and not civilian in application, usually because they lack useful or legal civilian application ...
for use during the
Vietnam War The Vietnam War (also known by #Names, other names) was a conflict in Vietnam, Laos, and Cambodia from 1 November 1955 to the fall of Saigon on 30 April 1975. It was the second of the Indochina Wars and was officially fought between North Vi ...
. As an injunction may have prevented necessary equipment from reaching U.S. armed forces, the judge ordered that the misappropriator pay an appropriate royalty to the trade secret owner rather than imposing an injunction.


Damages

In addition to injunctive relief offered under the UTSA, parties may also receive damages. Section 3(a) states that, "Damages can include both the actual loss caused by misappropriation and the unjust enrichment caused by misappropriation that is not taken into account in computing actual loss". Furthermore, the act stated in section 3(b) that if misappropriation is, "willful and malicious" the court may award damages up to twice what would otherwise be entitled under section 3(a). Restrictions similar to those imposed on the duration of injunctive relief are imposed on the duration of damages as well.


Attorney's fees

Section 4 of the UTSA stipulated that the court may award attorney's fees to the prevailing party for actions made in "bad faith or willful and malicious misappropriation".


Other provisions

*Section 5 provided for the "preservation of secrecy"; namely that a court should take reasonable means to protect a trade secret during any legal action concerning the trade secret. These secretive measures can include sealing records and
gag order A gag order (also known as a gagging order or suppression order) is an order, typically a legal order by a court A court is any person or institution, often as a government institution, with the authority to Adjudication, adjudicate legal d ...
s. *Section 6 provided a
statute of limitations A statute of limitations, known in civil law (legal system), civil law systems as a prescriptive period, is a law passed by a legislature, legislative body to set the maximum time after an event within which legal proceedings may be initiated. ("T ...
, requiring that any action under the UTSA must be "brought within 3 years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered". *Section 7 stated that the UTSA superseded any existing "... tort, restitutionary, and other law of this State providing civil remedies for misappropriation of a trade secret". The section also made clear that the UTSA did not affect (1) contractual remedies, (2) civil remedies not based on trade secret misappropriation, or (3)
criminal In ordinary language, a crime is an unlawful act punishable by a state or other authority. The term ''crime'' does not, in modern criminal law Criminal law is the body of law that relates to crime. It prescribes conduct perceived as thre ...
remedies, which may otherwise be of use to the aggrieved party. *Section 8 stated the goal of making trade secret law uniform among states enacting the UTSA. *Section 9 provided a short title to refer to the act and section 10 described the
severability In law, severability (sometimes known as salvatorius, from Latin) refers to a provision in a contract or piece of legislation which states that if some of the terms are held to be illegal or otherwise unenforceable, the remainder should still apply ...
of the act. *Sections 11 and 12 provided a date when the act took effect and the opportunity to explicitly list other acts to be repealed.


Adoption by U.S. states

, the UTSA has been adopted by all states except New York and North Carolina (but its law is very similar and seems to borrow heavily from the ac

. On May 2, 2013, Texas enacted Senate Bill 953, becoming the 47th state to adopt the UTSA. The Texas statute took effect on September 1, 2013. Massachusetts adopted the Uniform Trade Secrets Act effective October 1, 2018. The UTSA has also been adopted in the
District of Columbia ) , image_skyline = , image_caption = Clockwise from top left: the Washington Monument and Lincoln Memorial on the National Mall, United States Capitol, Logan Circle (Washington, D.C.), Logan Circle, Jefferson Memoria ...
,
Puerto Rico Puerto Rico (; abbreviated PR; tnq, Boriken, ''Borinquen''), officially the Commonwealth of Puerto Rico ( es, link=yes, Estado Libre Asociado de Puerto Rico, lit=Free Associated State of Puerto Rico), is a Caribbean island and Unincorporated ...
, and the U.S. Virgin Islands.The following are links to the state Code (law), codes of some of the states that have passed the UTSA
CaliforniaDelawareIllinoisIowaMinnesotaVirginiaWest Virginia
States are not required to pass the act exactly as is, and some have made amendments.


Notable cases

The following cases have directly referenced the UTSA: *'' Rivendell Forest Prods. v. Georgia-Pacific Corp.'' (10th Cir. 1994) * ''Comprehensive Techs. Int'l v. Software Artisans, Inc.'''' ''(4th Cir. 1993) * ''DVD Copy Control Association v. Bunner'' (Cal. App. 1994) *''Ajaxo v. E*Trade Financial Corp. ''(Cal. App. 2010) *'' Silvaco Data Systems v. Intel Corp.'' (Cal. App. 2010) *''R.C. Olmstead, Inc. v. CU Interface'' (N.D. Ohio 2009) *''Justmed v. Byce'' (9th Cir. 2010) *''Decision Insights, Inc. v. Sentia Group, Inc. ''(4th Cir. 2011) *''Cypress Semiconductor Corp. v. Superior Court'' (Cal. App. 2008) *''NCR v. Warner'' (S.D. Ohio 2008) *''Othentec v. Phelan ''(4th Cir. 2008) *''Southern Nuclear Operating Co. v. Elec. Data Sys. Corp. ''(11th Cir. 2008)


International application

Trade secret law varies more from country to country. The
North American Free Trade Agreement The North American Free Trade Agreement (NAFTA ; es, Tratado de Libre Comercio de América del Norte, TLCAN; french: Accord de libre-échange nord-américain, ALÉNA) was an agreement signed by Canada, Mexico, and the United States that crea ...
(NAFTA) has provisions providing for uniform minimum standards for protecting trade secrets. Trade Secrets in
Europe Europe is a large peninsula conventionally considered a continent in its own right because of its great physical size and the weight of its history and traditions. Europe is also considered a Continent#Subcontinents, subcontinent of Eurasia ...
are dealt with on a country-by-country basis. In
England and Wales England and Wales () is one of the three legal jurisdictions of the United Kingdom. It covers the constituent countries England and Wales and was formed by the Laws in Wales Acts 1535 and 1542. The substantive law of the jurisdiction is Engli ...
, trade secret protection is predicated upon the common law concept of "
breach of confidence The tort A tort is a civil wrong that causes a claimant to suffer loss or harm, resulting in legal liability for the person who commits the tortious act. Tort law can be contrasted with criminal law, which deals with criminal wrongs that ...
"—i.e., regardless of the existence of a
contract A contract is a legally enforceable agreement between two or more Party (law), parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, Service (economics), ser ...
, those who obtain the trade secret in confidence shall not take unfair advantage of it without consent.
Germany Germany,, officially the Federal Republic of Germany, is a country in Central Europe. It is the second most populous country in Europe after Russia, and the most populous member state of the European Union. Germany is situated between ...
's Act Against Unfair Competition states, "any person who, in the course of business activity for purposes of competition, commits acts contrary to honest practices" and hold violators responsible for damages.


See also

*
Defend Trade Secrets Act The Defend Trade Secrets Act of 2016 (DTSA) (, codified at , et seq.) is a United States federal law that allows an owner of a trade secret to sue in federal court when its trade secrets Trade secrets are a type of intellectual property that incl ...
*
Economic Espionage Act of 1996 The Economic Espionage Act of 1996 () was a 6 title Act of Congress dealing with a wide range of issues, including not only industrial espionage (''e.g.'', the theft or misappropriation of a trade secret and the National Information Infrastructure ...
* Glossary of legal terms in technology * Biswamohan Pani, charged in 2008 with stealing $1 billion worth of trade secrets from Intel * '' Data General Corp. v. Digital Computer Controls, Inc.'' addressing secrecy given widespread disclosure *
Non-disclosure agreement A non-disclosure agreement (NDA) is a law, legal contract or part of a contract between at least two party (law), parties that outlines confidential material, knowledge, or information that the parties wish to share with one another for certain p ...
* '' PhoneDog v. Kravitz'' addressing whether social media accounts could constitute trade secrets *
Trade secret Trade secrets are a type of intellectual property that includes formulas, best practice, practices, business process, processes, designs, legal instrument, instruments, patterns, or compilations of information that have inherent economic value be ...
* The Case for a Federal Trade Secrets Act * Ajaxo Inc. v. E*Trade Financial Corp.


References


External links

* {{Cite web , title = Uniform Trade Secrets Act , url = http://www.uniformlaws.org/Act.aspx?title=Trade%20Secrets%20Act , website = Uniform Law Commission, National Conference of Commissioners on Uniform State Laws , type = official site , access-date = 2013-05-14 United States intellectual property law Secrecy
Trade secrets Trade secrets are a type of intellectual property that includes formulas, best practice, practices, business process, processes, designs, legal instrument, instruments, patterns, or compilations of information that have inherent economic value be ...
Trade secrets