Trade Secret Protection

Trade Secret Protection (Internet Law)

This section introduces, discusses and describes the basics of trade secret protection. Then, cross references and a brief overview about Internet Lawin relation to trade secret protection is provided. Note that a list of bibliography resources and other aids appears at the end of this entry.

Trade Secret Seizure

Trade Secret Seizure under the Defend Trade Secrets Act of 2016

The Defend Trade Secrets Act of 2016 (DTSA), Pub. L. No. 114-153, became law on May 11,
2016. It amends 18 U.S.C. § 1836 to create a private right of action for the misappropriation
of trade secrets “for which any act occurs on or after the date of the enactment” and where the
trade secrets “[are] related to [] product[s] or service[s] used in, or intended for use in, interstate
or foreign commerce.” [18 U.S.C. § 1836(b)(1)] The impetus for the DTSA was Congress’s sense that “trade secret
theft, wherever it occurs, harms the companies that own the trade secrets and the employees
of the companies.” [DTSA, Pub. L. No. 114-153, § 5(2)].

The DTSA uses the definition of “trade secret” that was set forth in the Economic Espionage
Act of 1996, codified in 18 U.S.C. § 1839(3), and that broadly encompasses “all forms and types of financial, business, scientific, technical, economic, or engineering information, . . . , whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically,
photographically or in writing . . .” .

In addition, for “information” to qualify as a “trade secret” § 1839(3) requires that “the owner [of the information] has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not
being readily ascertainable through proper means . . .” .

The act of “misappropriation” is defined in the newly created §§ 1839(6) and (7).
Sections 1836(b)(2) and (3) govern the remedies for trade secret misappropriation. Section
1836(b)(3) provides that courts may grant the standard remedies of injunctive relief or
damages. Section 1836(b)(2) also authorizes a court, upon ex parte application of a plaintiff
and “in extraordinary circumstances,” to issue “an order providing for the seizure of property
necessary to prevent the propagation or dissemination of the [subject] trade secret.”

Stages of the Trade Secret Seizure Best Practices

Section 1836(b)(2) contemplates a multistage process for the seizure of trade secrets, including
the following essential steps:
• issuance of a seizure order by the court following an application for the order,
governed by §§ 1836(b)(2)(A) and (B);
• seizure of the misappropriated trade secrets by law enforcement officers and
the “technical experts,” governed by § 1836(b)(2)(E);
• custody of the seized material by the court, governed by §§ 1836(b)(2)(D)(i)–
(iii);
• conduct of a seizure hearing by the court, governed by § 1836(b)(2)(F); and
• examination of the seized material by a special master, if one is appointed by
the court, governed by § 1836(b)(2)(D)(iv).

Designation of the United States law enforcement officer to serve and execute any seizure order issued pursuant to 18 U.S.C. § 1836(b)(2)

The provision does not specify which federal law enforcement officer must execute a seizure
order granted under this authority. However, the United States marshal traditionally has
carried out seizure orders authorized under similar provisions, such as 15 U.S.C.
§ 1116(d)(1)(A). Furthermore, pursuant to 28 U.S.C. § 566(a), “[i]t is the primary role and
mission of the United States Marshals Service . . . to obey, execute, and enforce all orders of
the United States District Courts . . ., as provided by law.” Accordingly, unless the applicant
requests otherwise, the Court should presumptively designate the United States marshal to
execute the seizure order issued under 18 U.S.C. § 1836(b)(2).

Sections 1836(b)(2)(B)(v) and (b)(2)(F) require that the seizure hearing take place “not
later than 7 days after the order has issued.” In other words, the seizure must be executed
within seven days of the issuance of the seizure order, as computed in accordance with Rule 6
of the Federal Rules of Civil Procedure. Because the United States marshal has other statutory
functions, he or she may not be available to execute the seizure order within seven days of
issuance. The applicant therefore must contact the marshal ahead of time to ensure that the
order can be executed within the statutory time period. The marshal may be able to tentatively
schedule the seizure on the basis of the estimated date of issuance of the order. The applicant
may find it helpful to provide the marshal with a copy of the draft order, if available, for comments
regarding its execution.

In some instances, another federal law enforcement officer may be better situated than the
United States marshal to carry out the seizure order sought by the applicant. For example, a
United States customs officer may be better placed to intercept material being carried across
borders. It is incumbent on the applicant to determine which federal law enforcement officer,
if not the United States marshal, is best suited to execute the order.

The applicant must not assume that all federal law enforcement officers will serve and
execute process on behalf of civil litigants. If the applicant would like to have the court designate
an officer other than the United States marshal to serve and execute the seizure order, the
court should require the applicant to show that the officer is authorized by statute to serve and
execute the order. For example, an applicant seeking to have a United States customs officer
designated should at least point to 19 U.S.C. § 1589a, which states that, “[s]ubject to the direction
of the Secretary of the Treasury, an officer of the customs may . . . execute and serve any
order . . . or other process issued under the authority of the United States.”

Nomination of Technical Experts

Section 1836(b)(2)(E) states that the “court shall order that service of a copy of the order under this paragraph,
and the submissions of the applicant to obtain the order, shall be made by a
Federal law enforcement officer who, upon making service, shall carry out the
seizure under the order. The court may allow State or local law enforcement
officials to participate, but may not permit the applicant or any agent of the
applicant to participate in the seizure. At the request of law enforcement officials,
the court may allow a technical expert who is unaffiliated with the applicant
and who is bound by a court-approved non-disclosure agreement to participate
in the seizure if the court determines that the participation of the expert
will aid the efficient execution of and minimize the burden of the seizure.”

The execution of seizure orders issued under 18 U.S.C. § 1836(b)(2) may often require the
assistance of technical experts because the law enforcement officers executing the orders may
not have the necessary expertise to identify the material targeted for seizure. Even if they have
the expertise, the officers may not be authorized to provide such technical assistance, as the
assistance may constitute subsidization of private litigation. Furthermore, the officers need the
technical experts to provide guidance about the limits of seizure. The officers may not be able
to determine if enough material has been seized to accomplish the objective of seizure. Finally,
with respect to the United States marshal, the marshal as an officer of the court must remain
neutral and therefore avoid participating in any substantive determinations in the case, such
as whether a particular object contains misappropriated trade secrets. The court can therefore
anticipate that, in many cases, law enforcement officers will request the assistance of the technical
experts.

Accordingly, the court should require the applicant to nominate experts at the time of
filing of the application, and the court should consider appointing the experts proactively
when it issues the seizure order. The court, the applicant, and the officers would be ill served
by waiting for the explicit request of the officers for experts and thereby forcing the applicant
to return to the court to have experts appointed after the issuance of the seizure order. After
all, 18 U.S.C. §§ 1836(b)(2)(B)(v) and (b)(2)(F) require that the seizure hearing take place “not later than 7 days after the order has issued.” In other words, the seizure must be executed within seven days of the issuance of the seizure order, computed in accordance with Rule 6 of the Federal Rules of Civil Procedure. To fit a separate proceeding to appoint technical experts and also the actual execution of the seizure order within those seven days would be costly and burdensome for all involved. Furthermore, § 1836(b)(2)(B)(ii) requires that
the seizure order provide for the narrowest seizure of property and direct that the seizure be
conducted in a manner that minimizes any interruption of the business operations
of third parties and, to the extent possible, does not interrupt the legitimate
business operations of the person accused of misappropriating the trade secret.

In deciding the scope of the seizure order, the court may consider it helpful to understand the
work the technical experts are expected to perform while executing the order. Given this overlap
between the information the court would need to consider when granting the application
and when appointing the experts, there is good reason for the court to consider both issues at
the same time.

Trade Secret Protection

Trade Secret Protection