Defend Trade Secrets Act of 2016

The House and Senate passed the Defend Trade Secrets Act of 2016 effective April 27, 2016. (S. 1890). President Obama signed it into law on May 11, 2016.

Trade secrets have previously been protected by state laws in the U.S. This bill amends the Economic Espionage Act of 1996 to permit a private federal civil action for misappropriation of a trade secret that is "related to a product or service used in, or intended for use in, interstate or foreign commerce."

Through this law, parties may now bring an action for trade secret misappropriation in federal court. Remedies may include injunction, damages, restitution, ex parte seizure, exemplary damages and attorneys' fees.

• The bill allows for seizure of property as necessary to prevent "propagation or dissemination" of the trade secret.

• In a hearing, the Court may
• Grant an injunction as appropriate to prevent misappropriation
• Award damages for actual losses
• Award damages for unjust enrichment caused by the misappropriation (no duplicative recovery)

 or

• Grant a reasonable royalty in lieu of damages

• In addition, if the trade secret is "willfully and maliciously misappropriated," the Court may award exemplary damages - not more than 2x the amount of damages awarded.

• The court may award reasonable attorney's fees to the prevailing party in certain circumstances.

This federal right of action does not supersede state actions, but it gives claimants an additional venue.

IMMUNITY

An individual may not be held liable for disclosure of a trade secret that (A) is made (i) in confidence to a government official, directly or indirectly, or to an attorney, and (ii) solely for the purpose of reporting or investigating a suspected violation of the law, or (B) is made in a complaint or other document filed in a lawsuit or other proceeding if the filing is made under seal.

An individual who files a whistleblower lawsuit made disclose the trade secret to his/her attorney and use the information in the court proceeding if the individual (A) files the trade secret information under seal, and (B) does not disclose the trade secret except pursuant to a court order.

EMPLOYERS BEWARE

An employer shall provide notice of the immunity (above) in any contract or agreement with an employee that governs the use of a trade secret or other confidential information. The notice may be provided by referencing a "policy document" provided to the employee that sets forth the employer's reporting policy for a suspected violation of the law.

If an employer doesn't comply with the notice requirements, the employer may not be granted exemplary damages or attorneys' fees in an action against an attorney who didn't get notice.

The notice provisions all to contracts and agreements entered into or updated after the enactment of this subsection.

Any organization that intentionally uses another' trade secret related to a product or service intended for use in interstate U.S. or foreign commerce for the economic benefit of anyone other than the owner of the trade secret and who intends to, or knows that, the owner will be injured, shall be fined the greater of $5million USD or 3x the value of the stolen trade secret (including research and design and trade secret reproduction expenses).

Trade secret theft may be utilized to bring a RICO action.

The owner of a trade secret may bring a civil, federal cause of action within 3 years of learning of the misappropriation (or when such owner should have known).

Trade Secrets

First Steps: What are trade secrets and how to protect them? (Colorado law)

Trade secrets are protected by state statute and these statutes are different from state-to-state in the U.S. As of today, there is no federal trade secret statute.  Of note, legislation was recently passed in the U.S. Senate entitled “Defend Trade Secrets Act of 2015” and is now pending in the House for action. An identical bill is pending in the House (H.R. 3326). Until passage of this legislation (which is far from certain), one must look to state law for an analysis of trade secrets. 

Under Colorado statute, a trade secret is defined as:

The whole or any portion or phase of any scientific or technical information, design, process, procedure, formula, improvement, confidential business or financial information, listing of names, addresses, or telephone numbers, or other information relating to any business or profession which is secret and of value. To be a “trade secret” the owner thereof must have taken measures to prevent the secret from becoming available to persons other than those selected by the owner to have access thereto for limited purposes. C.R.S. Sec. 7-74-102(4) (2015).

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Examples of information that might be a trade secret are:

• Personnel files
• Unpatented inventions
• Computer software code or script
• Customer and vendor lists
• Manufacturing processes or methods

In order for any of the above-information to be considered a trade secret, the owner must take stops to maintain the secrecy of this information.

Measures to Maintain Trade Secrets

Once a company decides that it has information it wishes to maintain as secret, it must institute measures to prevent the secret from becoming known to others. Examples of steps that can be taken are:

• Employee Agreements & Noncompete covenants (requiring confidentiality of specific information)
•  Limited Access (to those with a ‘need to know’)
•  Mark documentation as “Confidential” and/or “Trade Secret”
•  Maintain a log of all access
•  Signage (disallow visitors or employees from access to areas with trade secret information)
•  Remind terminated employees of obligations
•  Disallow social media & non-work-related Internet access
•  Locked areas or file cabinets
• Coat windows to areas containing confidential information
• Password protect computer access points with confidential information
• Create a Trade Secret Policy and inform all employees of it

Registration

Trade secrets are not registered. The only way to protect them is to keep them secret.

Exceptions

Information is not a trade secret if

• It was rightfully in a recipient's possession prior to the date of initial disclosure,
• At the time of disclosure (or later) it is published or becomes part of the public domain,
• It came into possession from a third party,
• It was independently developed.

Actions for Misappropriation

If trade secrets are misappropriated, a court action can be instituted to request:

•  Injunction or Restraining Order
• Damages (actual losses and profits of misappropriator) or a reasonable royalty
• If misappropriation is accompanied by fraud, malice or willful disregard of the owner’s rights, punitive damages made be recovered (equal to damage award)
• An action for misappropriation of trade secrets in Colorado must be brought within 3 years after the misappropriation is discovered or should have been discovered.

• Theft of a trade secret may also be a criminal act – a class 1 misdemeanor for the first offense; a 2^nd offense committed within 5 years of a prior conviction is a class 5 felony.
•  Class 1 misdemeanor: 6 to 18 months in jail; $500 to $5000 fine or both
•  Class 5 felony: 1-3 years imprisonment; $1000 to $100,000 fine or both

Please note that this material should not be considered legal advice and is for informational purposes only. If you have specific legal questions, you should consult a qualified legal professional skilled in the area of trademark law. If you would like more information about this topic, please contact Judith A. Keene, Esq. at (720) 684-5375 or by email at jkeene@holzeriplaw.com.

First Steps: What Is A Trademark? -- and How Can You Protect Your Brand?

Judith A. Keene, Esq. is Senior Counsel at HolzerIPLaw, PC. Practicing since 1987, she has assisted her clients with the creation, protection, and maintenance of their intellectual property issues. April 11, 2016

First Steps: What is a trademark?

-- and How Can You Protect Your Brand?

You have a name, a product, or an idea … while these may be intangible, they represent your intellectual property - the unique character of your business. They are yours and yours alone, and like business owners the world over, you want to keep them that way.

A well-designed and well-researched intellectual property program helps to safeguard your names, trademarks, products, business information, and ideas against infringement or copying by others. It can also save your business valuable time and money in the event a name or idea is already taken.

Through this blog I hope to clarify many of the issues that new clients have when they come to my office in order to make it easier to create protectable brands ...and to maintain them.

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Categories of Trademarks

A trademark (or service mark) is a word and/or design by which the purchasing public identifies the source of a product (or service).  A mark represents all the quality and goodwill developed by the owner.  A word and/or design for which trademark protection is claimed falls into one of four categories:

*  Arbitrary or Fanciful

*  Suggestive

*  Descriptive

*  Generic

A general understanding of these categories is important in choosing a trademark possessing protectable characteristics. An arbitrary or fanciful trademark receives the greatest protection because it is least likely to be confused with another origin.  It means nothing in the context in which it is used (e.g., "Apple®" computers or "Kodak®" film).  Suggestive marks are equally registrable and suggest a quality or ingredient of the product or service (e.g., "Caterpillar®" tractors).  Such marks require imagination to associate the mark and its meaning.

Descriptive marks are more generally understood to describe the products they represent (e.g., "The Breathable Mattress" for mattresses).  If a trademark examiner at the U.S. Patent and Trademark Office (PTO) deemed a mark descriptive, it may be denied registration or be granted limited registrability on the Supplemental Trademark Register (as opposed to the Principal Register).  After 5 years of continuous use, such a mark may (or may not) then achieve registration on the Principal Register by an application for that purpose.

Confusing Similarity

A trademark is protectable if, when used with a particular good or service, consumers are not likely to confuse it as coming from a different, source.  If such a “confusingly similar” pre-existing trademark, company name, or trade name exists, and the chosen mark is likely to cross paths with any of these pre-existing names or marks, the mark should not be utilized.  The mark first utilized in interstate commerce is the mark with senior rights.

Registration

A mark is protected upon creation in the U.S.; however, registration of a mark provides benefits that may not be otherwise available.  Use in only one state without any sales across state lines relegates registration to the Secretary of State in which the mark is used.  Use across state lines opens up the possibility for registration with the U.S. Patent and Trademark office. (PTO).  More information can be obtained at the PTO website.

Registration in some other countries is also possible through the U.S. PTO as the U.S. is a member certain treaties that permit such applications. In certain circumstances, this type of trademark application for registration is beneficial, however, a careful analysis of a trademark owner’s needs must be made before determining whether this application is sufficient, or if a direct application with the country of interest is more appropriate.

Use of a Mark

A mark should always be utilized as an adjective with either a TM or SM placed next to the mark if the mark is not registered with a national registrar (as opposed to a state registrar).  The company name and address should also appear somewhere on any written materials as well. Finally, efforts should be continuously made to stop junior confusingly similar uses of marks. Failure to properly utilize and protect a mark could result in loss of all protection for that mark. Some examples of trademarks that have lost protection are “Monopoly,” “Aspirin,” “Escalator,” and “Cellophane.”

Please note that this material should not be considered legal advice and is for informational purposes only. If you have specific legal questions, you should consult a qualified legal professional skilled in the area of trademark law. If you would like more information about this topic, please contact Judith A. Keene, Esq. at (720) 684-5375 or by email at jkeene@holzeriplaw.com.