August 6, 2018

Defend Trade Secrets Act vs. Uniform Trade Secrets Act: Reasonable Security Measures as Objective or Subjective?

Holland & Knight Trade Secrets Blog
Seth J. Welner | John Michael Marra

The Uniform Trade Secrets Act (UTSA), a model law governing civil actions for trade secret misappropriation that was first published more than 30 years ago, has helped to protect trade secrets in the numerous states that adopted it. In 2016 the Federal Government adopted a similar set of laws under the Defend Trade Secrets Act (DTSA), codified at 18 U.S.C. §1831-1839. The UTSA and the DTSA are similar but differ in some key respects. This post addresses one apparent distinction regarding reasonable security measures that, upon closer examination, is likely a distinction without a difference. 

Reasonable security measures arise from the definition of trade secrets in both statutes. The UTSA defines trade secrets as information that derives independent economic value from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use. The DTSA has a similar definition. Both Acts  further define trade secrets as being the subject of efforts to maintain secrecy, with the UTSA requiring efforts that are “reasonable under the circumstances” and the DTSA requiring only “reasonable measures.” This matter has not yet been addressed by  the courts. 

On first look, one might think that the DTSA changes the subjective “reasonable under the circumstances” standard from the UTSA to a more objective reasonableness test. But this may not be the case. Indeed, legislative history suggests that Congress did not intend to impose stricter requirements on companies, but rather that each trade secret owner should assess the value of the material it seeks to protect and the extent of threat and ease of theft in determining how extensive its protective measures should be. See Senate Report on Defend Trade Secrets Act of 2016, 114th Cong., S12213 (2016) (Statement of Hon. Chuck Grassley, from the Committee on the Judiciary). Furthermore, what constitutes reasonable measures in one particular field of knowledge or industry may vary significantly from what is reasonable in another field or industry. Id. The idea that reasonable measures may vary in different fields suggests that Congress intended courts to determine reasonableness based on the circumstances despite the omission of the “under the circumstances” language.

Moreover, though the DTSA is still fairly new, district courts addressing both have not expressly differentiated between the “reasonable under the circumstances” and “reasonable measures” standards. See e.g., CPI Card Group, Inc. v. Dwyer, 294 F. Supp. 3d 791, 807 (D. Minn. 2018) (stating that a “trade secret” is defined in both the DTSA and the MUTSA as “information that . . . is the subject of reasonable efforts under the circumstances to protect its secrecy”) (emphasis added); Teva Pharmaceuticals USA, Inc. v. Sandhu, 291 F. Supp. 3d 659, 675 (E.D. Pa. 2018) (stating that, although the DTSA and PUTSA use different wording to define a trade secret, they essentially protect the same type of information).

Accordingly, until this issue is more directly addressed, it appears that a subjective interpretation of the DTSA’s “reasonable measures” requirement should closely align with cases addressing the sufficiency of security measures under the UTSA. 

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