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Trade secrets act would help businesses battling data theft

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Trade secrets act would help businesses battling data theft

The Defend Trade Secrets Act of 2016, which was approved by Congress with bipartisan support and is expected to be signed into law by President Barack Obama, will create a smoother legal landscape for businesses pursuing trade secrets litigation by permitting cases to be filed in federal court, experts say.

Until now, businesses in most states could file suit under the Uniform Trade Secrets Act of 1979, which was amended in 1985, but had to do so in state courts. The problem is states have adopted different versions of the law, which has created complications for firms that conduct business in multiples states, or where data has been moved out of state, these experts say.

Attorneys say the ability to file litigation in federal courts will permit development of a more consistent federal law with respect to trade theft, which they describe as a growing problem.

“Trade secret violations are happening every day, and they’re becoming more and more serious,” said Paul E. Starkman, a member of law firm Clark Hill P.C. in Chicago.

Employees, contractors and people who are given access to the companies’ computer systems “are misappropriating data at an exponential rate that is growing every year,” he said.

The act does not pre-empt state law, including the Uniform Trade Secrets Act, which all but Massachusetts and New York had adopted, say experts.

But because of differences among the state laws, until now businesses “were required to rely on sort of a patchwork of state laws, which sometimes are consistent and sometimes aren’t,” said Clifford R. Atlas, a principal with Jackson Lewis P.C. in New York.

This law will “provide more consistency in terms of how the courts treat trade secrets, which allows companies to better model their behaviors,” and provide them with “more consistent guidance,” said Steven J. Berryman, a partner with Quarles & Brady L.L.P. in Milwaukee.

In a rare show of bipartisan support, the act, which was sent to the president late last month, passed the House in a 410-2 vote and the Senate in an 87-0 vote.