Federal Trade Secrets, Commerce Clause, Regulation, Jurisdictional Element, Defend Trade Secrets Act, DTSA
The Defend Trade Secrets Act of 2016 (“DTSA”) greatly expanded federal protection of trade secrets. But how many trade secrets were “federalized”? The short answer is: many, but not all. At the heart of the DTSA lies a mammoth jurisdictional problem: Congress only federalized certain trade secrets. Unlike copyrights and patents, Congress has no independent constitutional basis to regulate trade secrets. Instead, like trademarks, trade secrets are regulated under the commerce clause and must satisfy a jurisdictional element, which requires a nexus between interstate commerce and trade secrets. But unlike trademarks, Congress chose not to legislate to the fullest extent of its commerce clause power, excluding some trade secrets from federal protection. In short, the DTSA’s jurisdictional element ensures that only “technical” trade secrets—i.e., formulae, manufacturing processes, etc.—qualify for federal protection. “Business information” secrets are protected, if at all, only under state law.
This Article is the first to explain the DTSA’s jurisdictional element in depth and explore its practical and theoretical implications. Interpretation of the jurisdictional element in the DTSA is the Act’s key judicial dilemma. The jurisdictional element imposes two requirements on a federal plaintiff’s trade secret: (1) that the trade secret closely relates to a product or service; and (2) that the product or service actually flows in interstate commerce. As a practical matter, the old trade secret tort has been split in two—with technical trade secrets federalized and business information remaining protected solely by state law. Theoretically, this interpretation brings trade secret policy in line with other species of federal intellectual property policies.
The DTSA’s Federalism Problem: Federal Court Jurisdiction over Trade Secrets,
28 Fordham Intell. Prop. Media & Ent. L.J. 1
Available at: https://ir.lawnet.fordham.edu/iplj/vol28/iss1/1