Key Trade Secret Developments of 2020: Part 1

Faegre Drinker litigation partners Randy Kahnke and Kerry Bundy and associates Lauren Linderman, Michael Sawers and Kiera Murphy authored an article for Law360 titled “Key Trade Secret Developments Of 2020: Part 1.”

In part one of this two-part series, the authors discuss four notable developments in trade secret law during the year 2020 and provide takeaways summarizing key issues and practical guidance on each topic, including:

1. The extraterritorial reach of the Defend Trade Secrets Act (DTSA).
2. The U.S. trade deal with China, which signifies substantial changes to China’s intellectual property enforcement.
3. The U.S. Court of Appeals for the Third Circuit’s view that possession, as opposed to ownership, is sufficient to maintain an action for misappropriation of trade secrets under the Uniform Trade Secrets Act (UTSA).
4. The U.S. Court of Appeals for the Federal Circuit’s view that claims for misappropriation based on incorporation of trade secrets into patent applications do not necessarily give rise to federal jurisdiction.

First, based on section 1837 of the DTSA, the authors describe how trade secret plaintiffs are likely to rely on the Motorola Solutions Inc. (v. Hytera Communications Corp. Ltd.) decision in bringing DTSA claims against foreign actors in U.S. courts; they will also want to look for facts showing that the defendant’s acquisition, disclosure or use of the trade secret took place in the U.S. However, the extent to which other courts will adopt the same view of the DTSA’s extraterritorial reach remains to be seen, but at least one other jurisdiction has cited Motorola Solutions favorably.

Second, the authors focus on the U.S. trade deal with China that signifies substantial changes to China’s intellectual property enforcement. The deal better aligns China trade secret protections with the UTSA and the DTSA. Conceivably, this should make enforcement more consistent and predictable between the U.S. and China, but navigating the Chinese judicial system presents several unique challenges.

Third, since possession, as opposed to ownership, may be sufficient to maintain an action for misappropriation of trade secrets under the UTSA, the authors cite Advanced Fluid Systems Inc. v. Huber as an example. While some courts may find Advanced Fluid Systems’ reasoning persuasive if faced with similar questions regarding the right to maintain an action for trade secret misappropriation under another state’s trade secret law, litigants should be aware of some notable limitations to its reach, too.

Fourth, the authors explain how claims for trade secret misappropriation based on incorporation of trade secrets into patent applications do not necessarily give rise to federal jurisdiction. It is not uncommon for a trade secret misappropriation action to touch on issues of patent law, but Intellisoft Ltd. (v. Acer America Corp.) places limits on a defendant’s ability to gain access to federal court under such circumstances. Reliance on patents as evidence to support a trade secret misappropriation claim is insufficient by itself to invoke federal jurisdiction.