Trade secrets protection set to get tougher

Legal protection of trade secrets on a state-by-state basis has created enforcement problems. Now push is on for federal legislation

Momentum is building for federal legislation protecting trade secrets, an intellectual property attorney said at a Silicon Valley seminar on Thursday.

Trade secrets, in which a company keeps vital information a secret rather than disclosing it for patent protection, can be vital to companies in fields such as information technology. Intel endured a $1 billion trade secrets case in 2008 that saw a departing employee sent to prison.  

But protection of trade secrets via the Uniform Trade Secrets Act, which was passed on a state-by-state basis, has been limited, said attorney L. Scott Oliver, of legal firm Morrison & Foerster. "The core of the problem is that the Uniform Trade Secrets Act is just not that uniform," Oliver said.

The act was only adopted in 46 states, one state is not bound by another state's decision, and there is a statute of limitations of two to five years, he explained. Texas and New York never adopted the Uniform Trade Secrets Act, and provisions are decided differently from state to state.

"All these issues create problems for multistate companies, for national companies, and global companies," with companies having to develop separate trade secret plans for every jurisdiction, Oliver said. He also cited an example of multijurisdictional theft via computer, in which a computer in New York is hacked into by someone in Texas who passes secrets on to someone else in California. Questions arise over which state laws apply, Oliver noted. There also is no good remedy for international theft, he added.

But now federalization of trade secrets law appears to be on the horizon. Last year President Obama signed the Theft of Trade Secrets Clarification Act of 2012, which protects secrets used internally and not sold. The Foreign and Economic Penalty Enhancement Act of 2012 also was passed, which raises penalties. Meanwhile, a federal trade secret act that had failed to get passed in 2012 is expected to be re-introduced this fall, according to Oliver. Senate hearings on a bill to address foreign theft and foreign-sponsored theft also are anticipated.

Intel already has had to deal with the Biswamohan Pani case, which involved theft of $1 billion worth of trade secrets. "This gentleman unfortunately right now is sitting in a federal prison for three years," said Janet Craycroft, director of legal counseling at Intel.

The company, Craycroft said, strives to build a culture of information security with its employees, leveraging an information security policy and a code of conduct. Intel also pays attention to potentially disgruntled employees and is mindful of rumors.

"At the end of the day, we want our employees to feel personally responsible for protecting the company's trade secrets, and I think that's your best defense as an employer or as an attorney representing a client or a company."

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