Trade secrets and patents offer very different forms of protection, with different pros and cons. A trade secret may last indefinitely, while a patent has a fixed term of 20 years. Independent reinvention is permissible under trade secrets, but not with patents. And of course to obtain a patent, one must disclose the claimed invention to the public, in sufficient detail to enable one skilled in the relevant technology to make and use the invention.

Continue Reading Trade Secret vs. Patent – a False Dichotomy

For most (if not all) professional services firms, client databases, client contact lists, and information reflecting client preferences are regarded by such firms as trade secrets that are essential to the business.  Invariably, businesses identify this type of information as proprietary and trade secret in their employee confidentiality agreements and handbooks and subject them to duties of confidentiality.  However, a recent federal ruling provides an important reminder that the term “trade secret” is a legal term of art subject to strict standards and merely labeling general categories of company information as trade secrets does not make them so—no matter how important the information is to the business.  To be prepared to protect their trade secrets from misappropriation, firms should take inventory of what they regard as their trade secrets and critically assess whether they actually qualify as such, and if not, whether steps can be taken to make them qualify.

Continue Reading Reminder to Professional Services Firms – Do Not Take Your Trade Secrets for Granted

In trade secrets litigation, it is often critical to expeditiously obtain protection from further disclosure or continued misappropriation of the trade secret at issue through a motion for preliminary injunction.  Courts are quick to point out, however, that preliminary injunctions are “an extraordinary and drastic remedy,” and are only to be granted if the movant, “by a clear showing, carries the burden of persuasion” as to each element of the preliminary injunction test.  Lopez v. Brewer, 680 F.3d 1068, 1072 (9th Cir. 2012) (observing that to obtain preliminary injunctive relief, a plaintiff must generally demonstrate that: “1) he is likely to succeed on the merits of such a claim; 2) he is likely to suffer irreparable harm in the absence of preliminary relief; 3) the balance of equities tips in his favor; and 4) that an injunction is in the public interest.”).

Continue Reading Trade Secret Litigants Take Note: California District Court Provides Guidance on Obtaining a Preliminary Injunction and Expedited Discovery

You may be able to bring a misappropriation of trade secrets claim even if you do not actually own the misappropriated trade secret.  A growing number of federal cases indicate ownership of a trade secret may not be required in order for a plaintiff to sue for misappropriation; possession alone may be enough to confer standing.
Continue Reading Is Lawful Possession of a Trade Secret Enough for Standing to Sue for Misappropriation?

When filing a claim for trade secret misappropriation under the Defend Trade Secrets Act (DTSA) or a state’s Uniform Trade Secrets Act (UTSA), it is essential to strike the proper balance between sufficiently describing an underlying trade secret and avoiding disclosure of any details that would destroy its secrecy.  A federal court decision issued earlier this month in the Northern District of California, MBS Engineering Inc., et al. v. Black Hemp Box, LLC, et al., No. 20-cv-02825-JD, 2021 WL 2458370 (N.D. Cal. June 16, 2021), highlights this “obvious tension between the right of public access to court proceedings and the ‘secret’ part of a trade secret” and provides a useful example of the factors used by courts to assess an appropriately alleged trade secret claim.
Continue Reading Striking the Balance Between Detailed Description and Unnecessary Disclosure of the “Secret” in Trade Secret Litigation Pleadings

Amidst long-simmering diplomatic tensions between China and the United States, disputes arising out of Chinese companies’ alleged theft of technological trade secrets from rival American companies[1] have found their way to federal courtrooms. This stems, in part, from the availability of worldwide injunctive relief under the Defend Trade Secrets Act (“DTSA”), which provides American companies with a robust tool to combat trade secret misappropriation by foreign entities in cases where “an act in furtherance of the offense was committed in the United States.” 18 U.S.C. § 1837(2).
Continue Reading Illinois Court Finds China Inadequate Forum For Trade Secret Misappropriation Claims Against Chinese Tech Company

Whether under the federal Defend Trade Secrets Act (“DTSA”) or under state law uniform trade secrets acts (“UTSA”), assessing monetary damages in trade secret misappropriation cases is rarely easy.  By definition, trade secrets lose their value once they lose their secrecy, but the lost value is often difficult to monetize.  Calculating damages for misappropriation should account for the lost value of the trade secret “asset,” but courts often lose sight of this calculus in fixing damages.  Lost profits, unjust enrichment, and reasonable royalties are common measures of damages in trade secret misappropriation cases, but there is another rarely considered measure of damages:  the diminution in value of a plaintiff’s trade secret caused by the misappropriation.  Damages for the diminution in value of a trade secret are a form of compensatory damages, though some courts will grant injunctive relief due to the difficulty in valuing the diminution of trade secrets.  Aerodynamics Inc. v. Caesars Entm’t Operating Co., No. 2:15-cv-01344-JAD-PAL, 2015 U.S. Dist. LEXIS 129588, at *1 (D. Nev. Sep. 24, 2015).  DTSA (and most UTSA statutes), of course, recognize compensatory damages as a viable theory.  18 U.S.C. § 1836(b)(3)(B).  When courts have assessed trade-secret diminution theories, they have emphasized the critical importance of a quality expert and an almost asset-sale like economic valuation of the trade secrets.
Continue Reading Diminution in Value As A Measure of Damages for Trade Secret Misappropriation

In several recent decisions, district courts have held that liability under the Defend Trade Secrets Act can extend to extraterritorial defendants.  As set forth by Sheppard Mullin’s Tyler Baker in a prior blog post, the extraterritorial reach of the DTSA is rapidly expanding.  Non-U.S. Companies and the DTSA: Parameters of a Developing Reality | Trade Secrets Law Blog (citing vPersonalize Inc. v. Magnetize Consultants Ltd., 437 F. Supp. 3d 860, 878 (W.D. Wash. 2020); Micron Tech. Inc. v. United Microelectronics Corp., No. 17-cv-06932-MMC, 2019 WL 1959487 (N.D. Ca. May 2, 2019); Motorola Solutions Inc. v. Hytera Commc’ns Corp., 436 F.Supp.3d 1150, 1165 (N.D. Ill. 2020); ProV In’tl Inc. v. Lucca, No. 8:19-cv-978-T-23AAS, 2019 WL 5578880 (M.D. Fla. Oct. 29, 2019)).  As Mr. Baker observed, these rulings create a risk for foreign entities regarding trade secret theft, as federal courts have held that foreign actors may be subject to liability under the DTSA if the act in furtherance of the misappropriation occurred in the United States.
Continue Reading The DTSA as a Tool for Foreign Entities’ Enforcement of Trade Secrets: A New Legal Frontier

During the Obama Administration, American foreign policy made a strategic “pivot” to Asia with the goal of establishing a more balanced economic, diplomatic, and security-focused approach and relationship between the U.S. and the region that would serve as a bulwark against growing Chinese influence (see, e.g., the Trans-Pacific Partnership).

Continue Reading The China Pivot: Closing the “Back Door” to Trade Secret and IP Theft

The Defend Trade Secrets Act (“DTSA”), enacted in 2016, created a federal right of action for misappropriation of trade secrets. The Ninth Circuit recently addressed for the first time whether a DTSA claim may be brought against misconduct predating the enactment of the DTSA.  The Ninth Circuit held that it could, so long as the misappropriation continued until after the enactment of the DTSA.  See Attia v. Google LLC, — F.3d —, 2020 WL 7380256 (9th Cir. 2020).  
Continue Reading Ninth Circuit Applies the “Continued Use” Doctrine to the Defend Trade Secrets Act