Federal Issues in Trade Secret Law ([Dagger])

Article excerpt

I. INTRODUCTION

The general picture of trade secret law is that it is governed by state law as summarized in Restatement of Torts (1) and Restatement of Unfair Competition (Third) (2) and codified in more or less uniform state enactments based on the Uniform Trade Secrets Act. (3) The American Bar Association's Section of Intellectual Property soundly rejected a proposal for a preemptive federal trade secrets statute at its 1992 meeting in San Francisco. (4) Yet, long prior to the 1992 meeting, and at an accelerating pace thereafter, there have been several areas of federal relevance established in the law and practice of trade secret protection. (5) One must also consider federal issues presented by the Fourth, Fifth, Eleventh and Fourteenth Amendments, federal court jurisdiction to enforce state trade secret law, federal tax law and bankruptcy laws. (6)

II. THE (FEDERAL EMPLOYEE) TRADE SECRETS ACT (TSA)

Early on, Congress recognized a need to codify the protection that federal agencies had given to data collected from private parties on an ad hoc basis. Various trade secret codifications in such sections as 15 U.S.C. [section] 1776, 18 U.S.C. [section] 112, 19 U.S.C. [section] 1335 and in various portions of the Revised Statutes (RS) were, in June, 1948, consolidated into the Trade Secrets Act (TSA). (7) After several subsequent amendments, the act now appears at 18 U.S.C. [section][section] 1905, 1906, 1907 and 1909. TSA provides criminal penalties for a federal civil servant revealing trade secrets of private parties. (8) In turn, the civil servant can invoke the statute as a basis of privilege when asked to reveal the information in a judicial proceeding until the court overrules the privilege. (9)

TSA provides a safe harbor exception to the ban on revealing trade secrets or the like. Parties may reveal such information to the extent " ... authorized by law. ..." (10) As to banking information, the safe harbor extends to instances of express permission in writing from the Comptroller of the Currency, Board of Governors of the Federal Reserve System, or certain other organizations under the Federal Reserve Act or the Federal Deposit Insurance Corp. (11) The term "trade secret" provides a built-in screening limitation and a common sense threshold of significance. The "authorized by law" exception includes federal agency regulations promulgated within the scope of rule-making authority granted to the agency by Congress. (12)

TSA does not per se provide a private right of civil action to enjoin disclosure, though TSA in tandem with the Administrative Procedure Act (APA) works to that end in principle. (13) Much of TSA application has been subsumed in practice into trade secret and business privacy exemptions of the Freedom of Information Act (FOIA),14 procurement laws and regulations, and specific governing statutes and regulations for regulatory agencies described below. TSA, however, retains a vital modern role in holding federal employees and agencies responsible for treatment of information. (15)

III. GOVERNMENT PROCUREMENT CONTRACTING AND SUBCONTRACTING; INDUSTRIAL SECURITY MANUAL; SUBCONTRACTORS

The Federal Acquisition Regulation (FAR), along with some supplementation by particular agencies, notably the Department of Defense (DOD) Supplement to FAR (DFAR), govern the U.S. government's procurement of goods and services. (16) FAR exemplifies a structure of government acquisition of technical data or computer software with "limited" or "unlimited" rights. (17) The term "limited rights" refers to use for defined government purposes but excludes use for competitive procurement. (18) Along with the negotiations between a contractor and the government regarding limited versus unlimited rights pertaining to data, comes the issue of how much data to give in the first instance. (19)

Often, a redacted data delivery can satisfy government purposes. Modern standards of quality control and zero-defect goals, as well as growing capacity for data storage and management, militate increasingly against acceptability of redacted data deliveries. …