Federal Statutory Protection for Trade Secrets

A number of federal statutes afford some sort of protection to trade secrets. For example, governmental agencies or employees are prevented from disclosing trade secrets under the federal Trade Secrets Act, the Freedom of Information Act (“FOIA”), and the Toxic Substances Control Act.

The FOIA illustrates the potential tension between public interest in disclosure and the rights of parties that risk having their trade secrets disclosed.  In general, the FOIA requires that citizens have the right to seek public disclosure of most of the information gather by agencies and departments of the federal government; however, Congress did limit mandatory disclosure by the creation of certain exemptions, including trade secrets and other privileged or confidential commercial or financial information.  However, the Supreme Court has held that these exemptions are discretionary, and the agency may elect whether or not to disclose the information.  If possible, parties submitting trade secrets to the government should negotiate a confidentiality agreement with the staff of the receiving agency and should such an agreement not be feasible consideration should be given to asking a court to issue a protective order before disclosing the confidential information.  Parties that have submitted trade secrets to the federal government may later attempt to block disclosure; however, success of any such action will turn on whether the party seeking to prevent disclosure can show that substantial competitive harm will occur if the disclosure is made.

Disclosure of trade secrets may also give rise to criminal liability in certain circumstances.  The Federal Trade Secrets Act makes it a crime for any employee of the United States or any states or any agency thereof, to the extent not authorized by law, to publish, divulge, or disclose information that constitutes a trade secret.  Criminal sanctions may also be available under the Economic Espionage Act of 1996.   Both civil and criminal penalties may be imposed under the Computer Fraud and Abuse Act against persons that access a computer used in interstate or foreign commerce without authorization or that exceed the limits of their authorized access to such a computer.  Liability for trade secret theft, including substantial fines and/or imprisonment, may also imposed under federal mail fraud and wire fraud statutes for schemes that use the mail or wires to defraud another of property or to deprive them of the intangible right of honest services, which often cover the misappropriation of confidential and proprietary information that qualifies as “property” for purposes of the statutes. Finally, the government may bring criminal complaints and indictments under the federal Racketeer Influenced and Corrupt Organizations Act alleging that the theft of trade secrets constitutes the forming of an enterprise to engage in a pattern of racketeering activity. 

The content in this post has been adapted from material that will appear in Technology Management and Transactions (Fall 2008) and is presented with permission of Thomson/West.  Copyright 2008 Thomson/West.  For more information or to order call 1-800-762-5272.

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