Protecting Your Trade Secret in US: Employer’s Perspective

Trade secret and confidential information is an important part of every company. The company opts for different policies and regulations which helps in protecting the trade secret for the company. Whether it be a Fortune 100 company or a small one, protection is required everywhere. The employers must be very clear when it comes to regulating the same and for this, it becomes imperative to understand the overview of two federal laws in the US. These are Defend Trade Secrets Act of 2016 (DTSA) and the Computer Fraud and Abuse Act (CFAA). These two federal laws help in providing some protective measures which the employer can opt for when it comes to preventing the misappropriation of trade secret information by the employees.

^{[Image Source: gettyimages]}

Defend Trade Secret Act of 2016

The DTSA helps the employer to protect against the misappropriation of trade secret information. The DTSA defines “Trade Secret” in broad terms: “All forms and types of financial, business, scientific, technical, economic, or engineering information.” As prevailing in other jurisdictions as well, DTSA also requires that for availing the protection under the said Act, the employer must show that effective measures were taken by the employers for protecting the same. As done in most corporations, the employer generally tends to execute a confidential contract with their employees where the burden can be satisfied by stating that the information must be protected as a trade secret. In case of any infringement, the DTSA helps the employer to obtain injunctive relief, monetary damages, punitive damages, and attorneys’ fees.

Computer Fraud and Abuse Act

With more digitization and businesses becoming online, the use of computer-generated works is increasing and this entails a huge risk when it comes to protecting the trade secret. The risk for misappropriation of such confidential information increases. Therefore, with DTSA providing effective relief to the employers, CFAA equally provides additional remedies to the employers, who can equally obtain relief and compensatory damages even under CFAA. As per the CFAA, civil cause of action can be initiated in case the employer is injured due to the misappropriation of confidential information, including access without authorization or in excess of authorization, of a protected computer. Nevertheless, CFAA does not define “authorized access,” leading to a different interpretation of the term.

There have been multiple interpretations of the “authorized access” clause. Either those users who obtain information to which their computer access does not extend or who misuse access that they already have. Meanwhile, the Supreme Court in the case of Van Buren vs. the United States restricted the scope of CFAA making it non-applicable to those employees who use otherwise authorized access for an improper purpose.

If an employer has its financial staff member and that member log into the system to look into financial information which is a trade secret. While leaving the employer’s firm, the member misappropriates the details. So, therefore, the employer will not able to claim any action under the CFAA as the access was authorized.

Some of the preventive measures could be like, having a strong confidentiality agreement and signing the non-disclosure agreement ensured that the trade secret is identified. Regardless of any authorized access, the agreement must be clear with the access for the improper use.  Having strong data encryption for all the trade secrets is also a better move and sharing the details with only those employees who directly work with the trade secret.

The employer needs to understand the regulations concerning DTSA and CFAA for effective trade secret enforcement and with more digitization, it is imperative to keep up with these regulations. The employer can use both statutes for initiating the cause of action against employees who misappropriated the trade secret.

Author: Saransh Chaturvedi an associate at IP And Legal Filings,  in case of any queries please contact/write back us at support@ipandlegalfilings.com.