Federal Trade Secrets

Image – les petits secrets, 1872, Public Domain courtesy of Wikimedia Commons.
2013 started with amendments to the federal trade secret act, the Theft of Trade Secrets Clarification Act of 2012.  The Act amends the 1996 Economic Espionage Act which prohibited the act of downloading a trade secret, with the intent to convert that trade secret where the trade secret is related to or included in a product placed in interstate commerce.

In a 2012 Second Circuit decision called United States v. Aleynikov, the court narrowly construed the act to preclude liability for an employee who uploaded some Goldman Sachs’ proprietary source code to a server in German, at which point he downloaded the source code to his home computer in New Jersey and took it to Chicago on his laptop.  The Second Circuit found that no liability could attach because the source code was not produced for or placed in interstate commerce.  That is, Goldman Sachs’ proprietary source code was only used by it internally and was not a commercial product that it licensed or sold in commerce.

The Theft of Trade Secrets Clarification Act amends the law to reverse this Second Circuit decision and thus impose liability for those exact acts found immune from liability in Aleynikov. Under the amendments, there is no longer a requirement that the product be one placed or used or sold through commerce.  The amendments also expand the scope of trade secret material that is subject to the act: no longer just applicable to products, the act covers “products or services” that are used in commerce or intended for use in commerce.

The net effect of the law is that employers have a stronger federal remedy in their arsenal to address employee or competitor trade secret violations.

About the author

One LLP is an elite intellectual property and entertainment law boutique with offices in Los Angeles and Orange County. The firm is especially known for handling high-profile copyright, trademark, patent and business litigation.