Trade secret owners have new Federal rights under the Defend Trade Secrets Act. But what about state law? Is state law still important for trade secret protection?
You bet state law is still important.
Trade secret owners have the same state trade secret rights that they had before the DTSA. Whenever a trade secret owner files suit in Federal court to assert the new Federal trade secret rights, the owner also will assert state trade secret rights. The trade secret owner will use the Federal courts to enforce state trade secret law.
The essential difference between Federal and state laws is that state laws vary from state to state. Let’s consider how different states treat the most common type of actual or feared trade secret disclosure – where a key employee with knowledge of valuable trade secrets takes a similar job with a competitor.
In some states, protection of trade secrets is more important than employee mobility. In those states, an employer can block a former employee from taking a job with a competitor where the nature of the employee’s new job would cause the ‘inevitable disclosure’ of the employer’s trade secrets to the competitor. States that have applied ‘inevitable disclosure’ to block an employee from taking a new job include Pennsylvania, Delaware, New York and New Jersey.
Other states view employee mobility as more important than trade secrets and refuse to apply ‘inevitable disclosure’ to prevent the former employee from taking a new job. States that reject ‘inevitable disclosure’ include Maryland, Connecticut and California.
The Federal Defend Trade Secrets Act predictably lands between the two competing positions on the subject of ‘inevitable disclosure.’ In this instance, state law can be more powerful than Federal law. The cautious employer who owns trade secrets will structure its employment agreements to improve the chances of success under state law as well as Federal law.
— Robert Yarbrough, Esq.