The Defend Trade Secrets Act: Why Interpreting the New Law On Its Own Terms Promotes Uniformity.

• Author: Ruelle, Patrick

1. Introduction

   Trade secrets, a category of intellectual property recognized at state and federal law, are integral parts of many corporations' intellectual property portfolios. (1) A trade secret is a type of intellectual property that is not disclosed by its owner, and is therefore unlike patents, trademarks, or copyrights--all types of information that are disclosed to the public. As a result, trade secrets may represent a viable alternative to patents and copyrights since its value is derived from its secrecy.

   In the United States, the laws governing trade secrets have typically been the offspring of the state common law. As each state developed its own understanding of trade secrets, this area of law became increasingly complex, leading the Uniform Law Commission to publish and promote the Uniform Trade Secret Act in 1979. (2) Since then, the UTSA has been enacted by forty-eight states and the District of Columbia.

   Despite this success, the enacted UTSAs across the country are not truly uniform, and state courts have also been unable to divorce themselves from preexisting, state-specific case law, which has led to conflicting results. (3) Due to this disjointed implementation, a vocal segment of both the business and legal communities have pushed for federalization, which, proponents hope, will finally bring uniformity and predictability to a historically opaque law.

   Congress was generally deaf to proponents' pleas. However, the ascendency of China as the world's second largest economy--compounded with widespread allegations that Chinese companies (and/or the Chinese government itself) hack into and steal American companies' trade secrets--created a more receptive environment on Capitol Hill. (4) In 2014, two bills were introduced in both houses of Congress. Both died.

   Although both bills failed in 2014, on July 29, 2015, the Defend Trade Secrets Act was resurrected and reintroduced on the Senate floor. (5) The DTSA purports to grant "[t]he district courts of the United States ... original jurisdiction of civil actions brought under this section." (6) On May 11, 2016, the DTSA was signed into law. This Comment assesses the DTSA within the existing framework of the UTSA and suggests federal courts interpret the new law on its own terms without overtly relying on the UTSA. (7)

   To accomplish the aforementioned goal, this Comment first traces the development of trade secrets from a common-law concept to codification under the UTSA, highlighting the UTSA's benefits and shortcomings. Next, this Comment will discuss the events that led to the push for congressional action. Finally, this Comment focuses on the newly enacted, non-preemptive DTSA, encouraging federal courts to rely on the DTSA's language without giving controlling weight to pre-existing UTSA precedent. If federal courts interpret the DTSA independently, the new law will have the greatest chance of creating a uniform trade secrets regime in the United States.

2. "Unity" out of Discord: The Uniform Trade Secrets Act

   Traditionally, trade secrets were protected under state law and developed according to each state's common law experience.8 Although previous legal regimes recognized trade secrets as a type of information asset, at the onset of the industrial revolution, trade secrets laws were discordant--non-uniform--nationally. (9) Due to the discrepancies between states, both the business and legal communities began pushing for a uniform law governing trade secrets. (10)

   The Uniform Law Commission took up this call for legislation, and by 1979, put forward the Uniform Trade Secret Act. (11) The UTSA sought to clarify and simplify trade secrets law. (12) Perhaps the most important clause of the UTSA is its unifying clause: "This [Act] shall be applied and construed to effectuate its general purpose to make uniform the law with respect to the subject of this [Act] among states enacting it." (13) Forty-eight states and the District of Columbia have enacted some form of UTSA. (14)

   Despite this success, the UTSA's application by state courts has not been uniform. For example, section 7 of the UTSA "displaces conflicting tort, restitutionary, and other law ... providing civil remedies for misappropriation of a trade secret." (15) At first glance, this clause appears to preempt each state's common law traditions in trade secrets, including the misappropriation of confidential information falling outside the definition of trade secret. However, problems can occur when a plaintiff sues for both misappropriation of a trade secret and the misappropriation of confidential information falling outside the statutory definition of a trade secret. (16) Many courts that have considered the issue have held that the UTSA's preemption provision "abolish[es] all freestanding alternative causes of action for theft or misuse of confidential, proprietary, or otherwise secret information falling short of trade secret status" (17) Thus, to be protectable, the confidential information must satisfy the statutory definition of a trade secret. (18)

   Courts in other states, namely Wisconsin, Arizona, and Virginia, have found the UTSA does not preempt common-law causes of action. (19) For example, Arizona and Wisconsin continue recognizing causes of action for the misappropriation of confidential (non-trade secret) information. (20) In Burbank Grease Servs., LLC v. Sokolowski, the Wisconsin Supreme Court interpreted Wisconsin's UTSA as not preempting common law causes of action involving the misappropriation of (non-trade secret) confidential information falling outside the scope of trade secrets statutory definition. The Wisconsin Supreme Court noted that the state legislature had only preempted the common law concerning the laws of trade secrets. (21) The legislature did not, however, preempt the common law governing the misappropriation of confidential information that was not a trade secret. Since the legislature had not taken these extra steps, the majority refused to accept (without further legislative action) that the misappropriation of confidential information could not be protected merely because it did not meet the statutory definition of a trade secret.

   The Wisconsin Supreme Court also downplayed the importance of section 8 of the UTSA. Section 8 of the UTSA requires the act be applied to "make uniform the law relating to the misappropriation of trade secrets among states enacting [it]." (22) Theoretically, section 8 requires courts assess how other states have applied the statute and harmonize the current case with them; under the approach outlined in Sokolowski, it was likely that UTSA uniformity would be undermined. Indeed, the dissent in Sokolowski, written by Justice Ann Walsh Bradley, noted that "[permitting litigants in UTSA states to assert common-law claims for the misappropriation or misuse...