New Federal Law Increases Trade Secret Protection

Nexsen Pruet, PLLC

Swampfox  -  January 22, 2013

On December 28, 2012, President Obama signed into law the Theft of Trade Secrets Clarification Act, which amends and expands the Economic Espionage Act (EEA).

The EEA, as enacted in 1996, made it a federal crime to knowingly misappropriate a trade secret “related to or included in a product that is produced for or placed in interstate or foreign commerce."

But last year a federal appeals court vacated the conviction of a former Goldman Sachs programmer who was convicted under the EEA for stealing, on his last day of employment with Goldman, source code for Goldman’s high-frequency trading system, which he intended to use at his new job. The appeals court interpreted the EEA narrowly to apply only where a trade secret relates to products a company sells, not where it relates to products a company uses internally.

In response, Congress passed the Theft of Trade Secrets Clarification Act (remarkably in this era of hyper-partisanship, by unanimous consent in the Senate and by a vote of 388-4 in the House). The Act amends the EEA so that it now covers a trade secret “related to a product or service used in or intended for use in” commerce. Congress intended for the amended EEA to protect services as well as products, and trade secrets like Goldman’s internal source code, which, though not for sale, was part of a trading system used in interstate commerce.

The expanded EEA should make it easier for employers, prosecutors, and courts to respond to trade secret violations.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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