Trade Secrets 2024

Global Overview

As businesses around the world evaluate their options for protecting valuable intellectual property in the context of today’s dynamic technological environment and highly mobile labour force, trade secret protection can be an essential complement to patent, copyright and trade mark protections.

This is particularly true in the USA in light of recent developments in the patent system – including shifting judicial standards for patent-eligible subject matter and the increased availability of post-grant challenges at the Patent Office – that have increased the importance of trade secret protection as an alternative vehicle for protecting intellectual property.

Moreover, as the developed world continues its shift from a manufacturing economy to a knowledge-based one, where the most rapidly growing sectors offer software and services, trade secret laws are more relevant than ever.

Artificial Intelligence in Full Force

Generative artificial intelligence (AI) is here to stay. Various industries have begun using large language models (LLMs) to analyse big data, create work product, and even innovate by developing novel ideas or inventions.

AI applications and LLMs raise several issues for trade secret protection. First, they may capture and store information that may be used to train and enhance the AI’s ability to generate results. If one were to input a trade secret into an AI application or LLM prompt, the trade secret could be at risk of unintended exposure to the company behind the AI application depending on the terms of the application’s end-user licence agreement. Second, the trade secret could be used as a training input for other problems or prompts, resulting in potential exposure to other end users of the AI application. Third, trade secrets stored by the AI application may be at risk of exposure from security breaches targeting the companies behind the AI application. Each of these issues will push trade secret owners to implement new ways to safeguard their trade secrets, such as updating employment agreements and training and carefully negotiating with companies behind AI applications to limit the use or accessibility of trade secret inputs.

Shifts in Employment Practices

Chambers Trade Secrets Global Practice Guide 2024 focuses on best practices for protecting trade secrets and avoiding the pitfalls of encroaching on others’ trade secret rights. A key area to which trade secret owners must remain alert is the use of technological and other protections to safeguard their valuable intellectual property. Recent decades have seen a sea change in the way employers recruit and maintain their workforce, including hiring a substantial number of remote employees, increased use of independent contractors, and the rise of the “gig” economy in which an ever-rotating cast of independent workers may have access to the company’s confidential information.

On top of these existing trends, shifts to hybrid and/or fully remote workplaces, even as many sectors make a push to return to traditional office-based employment, require balancing agility and innovation with appropriate confidentiality controls.

The increased focus on remote work underscores the need to create sophisticated confidentiality measures to protect trade secrets without impairing the ready interchange of ideas and information in collaborative work environments that may be necessary to promote the very innovation that generates trade secrets. Long gone are the days when a company could simply lock its crown jewels in a vault and rest easy knowing its trade secrets were safe.

In addition to the lasting shift away from traditional workplaces, lawmakers from various states and the Federal Trade Commission have demonstrated increasing aversion to non-compete agreements. These changes result in an increasingly mobile workforce that may choose to pursue new opportunities and leverage experiences from prior companies, causing the risk of misappropriation to grow. Employees may feel incentivised to use knowledge and insight gained at prior employers to differentiate themselves in a new job. Without adequate training and precautions, the line between acquired skills and acquired confidential information could blur. New employers (whether leanly staffed start-ups or global heavyweights) should implement stringent procedures for insulating themselves from others’ confidential information, while former employers must remain vigilant in safeguarding the improper use of their hard-earned property or risk losing it to competitors.

Litigation and ADR

Because disputes over trade secrets arise even when such precautions are taken, chapters in this guide explore the latest trends in trade secret litigation and alternative dispute resolution (ADR) proceedings. Given the high stakes for both sides in a trade secret dispute, it will be important for counsel to consider the full spectrum of offensive and defensive resources that may be available under statutory and common law misappropriation laws and advise clients accordingly – whether that entails implementing procedures for effectively maintaining the confidentiality of trade secrets or minimising the risk of coming into the possession of or using a competitor’s trade secrets.

Increasing Prevalence of DTSA Lawsuits

In the USA, just as the Uniform Trade Secret Act displaced nearly all state-specific common law misappropriation schemes, providing a theoretically uniform body of law across the many states, Congress enacted the Defend Trade Secrets Act (DTSA) in 2016, building on earlier federal economic espionage statutes, to create a federal system of trade secret law. Now that the first wave of DTSA cases has made its way through the federal courts, we are beginning to see greater uniformity and certainty on key issues.

As explored in this Global Practice Guide, a robust body of case law is developing on such topics as pleading requirements, the required particularity for descriptions of trade secrets in discovery, liability based on conduct predating the enactment of the DTSA, and allowable measures of damages. The enactment of the DTSA, not surprisingly, has resulted in a significant uptick in federal filings, as trade secret owners seek to benefit from the perceived uniformity and predictability of the federal courts. Moving forward, counsel should keep up to date with the latest developments in DTSA litigation, which is proving to be an indispensable part of every trade secret owner’s toolkit.

International Considerations

Protecting trade secrets internationally continues to be dynamic and unpredictable. Courts in the USA are just beginning to grapple with issues of liability and damages based on conduct occurring overseas, while many foreign jurisdictions are themselves still developing their trade secret jurisprudence. Global businesses must navigate the laws of each country and territory on a case-by-case basis and make informed decisions about how to safeguard trade secrets locally as well as centrally, to ensure that they do not inadvertently lose global protection for failure to comply with a single foreign law.

Trade secret owners conducting business in the USA should also not forget that the US International Trade Commission (ITC) can conduct investigations and recommend prohibitions against importing articles based on the theft of trade secrets. Although there was a long lull in such investigations, there has been a surge in investigations and enforcement actions at the ITC in recent years.

As a result, companies doing business globally should stay apprised of the latest developments in litigation involving international parties, whether in the federal court system, at the ITC or globally – that part, we assure you, is not a secret.