To date, trade secret protection has fallen under State law. On May 11th, the President signed a bill establishing a parallel scheme of Federal trade secret enforcement, granting new tools for the protection of company proprietary information.

Why should the addition of a Federal basis for protecting trade secrets be of significance to a company?

First, Federal courts are often faster and more efficient than state courts, and provide the benefit of nationwide subpoena power. Second, there is, in extraordinary circumstances, an ability to go into court and temporarily physically seize the property being utilized by someone infringing your trade secret.

In the employment arena, in order to make sure that an employee who is a whistleblower does not inadvertently incur liability when blowing the whistle, the new law states that such a disclosure is immune from civil and criminal liabilities under both the new Federal and all old State trade secret laws. Along with this immunity is a provision which permits an employer to collect legal fees or exemplary (punitive) damages from an employee, provided the employee agreement (or company policy) setting the ground-rules for trade secret protection specifically gives notice of such immunity (presumably to encourage whistle-blowing in the first place). Consequently, employers may well want to revise their standard trade secret documentation in order to obtain these additional liability protections (although of course the immunity notice can be viewed as a two-edged sword).

With respect to industrial espionage, the maximum penalty for criminal violation has been increased from $5,000,000 to the greater of $5,000,000 or three times the value of the stolen trade secrets, and the RICO law has been expanded to include foreign economic espionage and the criminal theft of trade secrets.

All agreements, whether with employees or with third parties with whom trade secrets will be shared (for example in negotiating an acquisition, effecting a joint venture, etc.), could benefit from revision in light of the new law to make clear its coverage, and in the case of employees to enhance employer rights. Particularly with respect to business transactions, in today’s mobile economy having recourse to Federal courts with nationwide subpoena power also can be a substantial enforcement tool.