The federal government continues to take aim at those who violate trade secrets rights. On December 28, 2012, the Theft of Trade Secrets Clarification Act of 2012 (S. 3642) became law, expanding the definition of trade secrets under the Economic Espionage Act (EEA). In addition, as previously reported in a Gibbons IP Law Alert blog, the President is expected to sign legislation recently passed by Congress that triples the damages for a violation of trade secrets protection laws and provides technical changes to patent applications and protections. Also worthy of note is an 82-page report from the U.S. Department of Justice issued last month detailing federal enforcement efforts concerning trade secrets theft.
Category: Trade Secrets
New Jersey Superior Court Finds the Recently-Enacted New Jersey Trade Secrets Act Does Not Preempt Common Law Claims
In an opinion dated December 7, 2012, a New Jersey Superior Court judge in Bergen County considered an issue of first impression relating to the recently-enacted New Jersey Trade Secrets Act (“NJTSA”). In SCS Healthcare Marketing LLC v. Allergan USA Inc. et al., defendant Allergan sought to dismiss numerous common law claims brought by plaintiff SCS, arguing that SCS’s statutory claim for misappropriation of trade secrets under the NJTSA preempted its common law claims. SCS filed suit alleging that Allergan misappropriated marketing contractors’ trade secrets relating to a proprietary technology portal. Specifically, SCS alleges that Allergan revealed its proprietary and confidential information to a rival health care marketing company, thereby violating state laws relating to unfair competition, disclosure and trade secrets.
This past spring, we reported the Second Circuit’s reversal in U.S. v. Aleynikov, where the Court considered violations of the Economic Espionage Act of 1996 (“EEA”), 18 U.S.C. § 1832, and the National Stolen Property Act (“NSPA”), 18 U.S.C. § 2314. In short, the Second Circuit ruled that the EEA pertains to trade secrets “placed in” commerce, and that Aleynikov’s alleged misappropriation of the source code of Goldman Sachs & Co.’s trading system, which was for internal use, therefore was not violative of the EEA or the NSPA.
Just as trade secrets cases continue to proliferate in the news, the U.S. Senate introduced legislation last week aimed at streamlining the ability of American companies to combat trade secret theft. Under the proposed legislation S.3389, “Protecting American Trade Secrets and Innovation Act of 2012″(“PATSIA”), a single federal statute would be created under which companies could sue in Federal Court, as an alternative to the existing structure of state or common law statutes. To be eligible, plaintiffs are required under a heightened pleading standard to: “(A) describe with specificity the reasonable measures taken to protect the secrecy of the alleged trade secrets in dispute; and (B) include a sworn representation by the party asserting the claim that the dispute involves either substantial need for nationwide service of process or misappropriation of trade secrets from the United States to another country.” Plaintiffs also are subject to a three-year statute of limitations.
Following a jury trial in the United States District Court for the Southern District of New York, Sergey Aleynikov was convicted of stealing and transferring proprietary computer source code used in his former employer’s high-frequency trading system, in violation of the Economic Espionage Act of 1996 (“EEA”), 18 U.S.C. § 1832, and the National Stolen Property Act (“NSPA”), 18 U.S.C. § 2314. On appeal, Aleynikov argued that his conduct did not constitute an offense under either statute because 1) the source code was not a “stolen” “good” within the meaning of the NSPA and 2) the source code was not “related to or included in a product that is produced for or placed in interstate or foreign commerce” within the meaning of the EEA. The United States Court of Appeals for the Second Circuit agreed with Aleynikov and reversed the District Court’s ruling.
Yesterday, Governor Chris Christie signed into law the New Jersey Trade Secrets Act, A-921/S-2456 providing state law protection against trade secret misappropriation. Prior to enactment, New Jersey was one of only four states (including New York, Massachusetts and Texas) that had not adopted some form of the Uniform Trade Secrets Act.