TRADE SECRETS

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March 11, 2023

Trade Secrets

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Trade Secrets

Part 1

       The United States Patent and Trademark Office is categorically a federal organization in the US in charge of issuing patents, protecting the rights concerning trade secrets, and registering trademarks (Epstein, R. A. (2004). In a nutshell, it is charged with carrying out the mandate of Article I, Section 8, Clause 8 of the US Constitution. This body defines trade secrets to be information that has an originally authentic independent economic value. The rationale for this is because it is a piece of information known by a few people. Subsequently, such secrets ought to have economic value to a plethora of other people who are not in a position to acquire such information. Finally, such information must be subject to reasonable efforts to maintain its secrecy.

     The USPTO does not register trade secrets because they do not require any procedural formalities for them to be protected. It is a body that has firmly been unequivocal concerning the significance of protecting trade secrets (Epstein, R. A. (2004). They point to two key pieces of legislation that aided in the protection of trade secrets. The Economic Espionage Act of 1996 criminalized the theft of trade secrets. This statute was later amended by the Defend Trade Secrets Act of 2016, which forms part of federal laws that deal with trade secret protection.

    The USPTO maintains that protection of trade secrets traces its genesis from common law. Moreover, they are of the position that each state has devised a manner in which they deal with trade secret protection, of which many of them base their laws on the Uniform Trade Secrets Act. The USPTO compares the protections afforded by trade secrets to those afforded by patents. They claim that the legal protections for the two are nearly identical, with trade secret protection subject to numerous limitations. There exists no time limit concerning the duration in which a trade secret ought to be protected.

Part 2

    The Defend Trade Secrets Act of 2016 (DTSA) is relatively new legislation that allows U.S. employers to bring suits in federal court in matters concerning misappropriation of information regarding trade secrets. The Act under section 1832, construes the term theft of trade secrets to mean an act of converting a trade secret for one’s use. That section’s provision emphasizes the consequences of such acts.

    DTSA enables owners of trade secrets to establish a federal cause of action against those who violate them. Subsequently, it cannot supersede existing state Trade Secret law regimes. (Burk, D. L. (1992).  In a nutshell, a Trade Secret owner seeking to sue, have the option to file parallel federal and state claims in federal court for misappropriation of trade secrets. This position was established in the case of Panera, LLC v. Nettles, (2016).  Under the statute, when one is filing a lawsuit, it is critical to elaborate why the said misappropriated for the suit to stand. The burden of proof lies with the person who claims that such trade secrets were misappropriated. If the due procedures are not adhered to then the complaint may be dismissed with prejudice. This was stated by the court in Raben Tire Co., LLC v. McFarland, (2017). Claims under the DTSA can be initiated before the elapse of three years. Subsequently, section 1836(b)(2) of the DTSA provides for an ex parte civil seizure mechanism. Furthermore, it provides for a lot of remedies upon a finding that a party misappropriated a Trade Secret this is under section 1836(b)(3). The foregoing remedies are always at variance.

Part 3

    Michigan joined the majority of states in 1998 when it enacted the Uniform Trade Secrets Act (MUTSA). Any party seeking protection of a trade secret under MUTSA must demonstrate, whatever they are claiming amounts to a “trade secret”. In addition to that, they ought to show that the alleged violator did not imply or express consent to use the information. This position was affirmed in the case of Mike’s Train House, Inc v Lionel (2006) and subsequently retaliated in Sherman & Co v Salton Maxim Housewares (2000).

Michigan used common law concepts on trade secrets long before MUTSA was enacted. This was evident in the case of Stromback v. New Line Cinema (2004).  MUTSA does not preclude contractual or criminal remedies for unauthorized use of a company’s trade secrets, or other civil remedies for trade secret misappropriation (Burk, D. L. (1992). In a nutshell, it preempts only those common-law unfair competition claims concerning the theft of a company’s confidential information. This was confirmed in the case of Planet Bingo, LLC v VKGS, LLC (2013).  Furthermore, it does not preclude claims based on wrongful conduct unrelated to the alleged misappropriation of trade secrets. Both common law and MUTSA, form part of Michigan law and are obligated to protect a company’s ownership rights in trade secret information even if the company does not have a competitive place with the individuals working for them. This claim was made in Superior Consultant Co v Bailey. Regardless of whether trade secrets are involved, MUTSA does not preclude a common-law unfair competition claim where the plaintiff alleges unethical or unfair conduct, as the court decided in Dana Ltd v American Axle & Mfg Holdings, Inc (2002).

Part 4

    According to the decision in the United States v. Howley (2013), a defendant is construed to violate federal law when he or she “steals” a trade secret with the motive to cause intellectual harm to the owner of that trade secret. The owner of the trade secret must establish the existence of the trade secret, as was the case in the United States v. Asgari (2019). Marc and Bernard committed misappropriation because they obtained a trade secret through unethical means. This is a violation of Section 1839(5) of the Uniform Trade Secrets Act. They have violated the law under which prohibits stealing trade secrets. The intent to convert such trade secrets for personal gain constitutes a violation of Apex’s intellectual property rights. They knowingly duplicated and transmitted such secrets without authorization from Apex. They have thus committed offenses under subsection 5 by conspiring with the wives to steal trade secrets with the intent of profiting.

    Fines and jail time may be imposed for criminal theft of trade secrets. Section 1832 states that if an individual is found guilty, he or she may be fined $250,000 s or imprisoned for a period not exceeding ten years. The two have committed offenses under the Act involving the theft of trade secrets and are thus subject to the aforementioned punishment.

Conclusion

    The logic behind protecting trade secrets is similar to that of patents in a plethora of ways. The original Constitution of the US made no mention of the government’s right of eminent domain. However, the right is impliedly stated in the Fifth Amendment, which states that when an individual’s private property is taken for public use by another then it must be compensated fairly. (Epstein, R. A. (2003). The Fifth Amendment of the Constitution, the Defend Trade Secrets Act of 2016, and common law currently protect the foregoing matter of intellectual property in the US.

Reference

  1. Constitution of the United States of America, Clause 8.
  2. Epstein, R. A. (2004). The constitutional protection of trade secrets under the takings clause. The University of Chicago Law Review, 57-73.
  3. Uniform Trade Secrets Act.
  4. Epstein, R. A. (2003). Trade secrets as private property: Their constitutional protection. Available at SSRN 421340.
  5. Burk, D. L. (1992). Protection of Trade Secrets in Outer Space Activity: A Study in Federal Preemption. Seton Hall L. Rev., 23, 560.
  6. Defend Trade Secrets Act of 2016.
  7. Economic Espionage Act of 1996.
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