On December 28, 2012, the President signed the Theft of Trade Secrets Clarification Act of 2012, which significantly expands trade secret protection by extending criminal penalties to the theft of a wider class of trade secrets.

The Clarification Act amends the Economic Espionage Act of 1996 (“EEA”), 18 U.S.C. §1832.  Before amendment, the EEA protected a trade secret “that is related to or included in a product that is produced for or placed in interstate or foreign commerce.”  Section 1832(a) now includes a trade secret “that is related to a product or service that is used or intended for use in interstate or foreign commerce.”

California Civil Code §3426.1(d) defines a trade secret as “information, including a formula, pattern, compilation, program, device, method, technique, or process that: (1) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”  Provided that the information qualifies as a trade secret, the expansion of the EEA means that company “back-office” information and processes, such as unique business methodologies, customer lists, internal market and customer research, and programs developed to create and utilize that information, are subject to the criminal penalties of the EEA.  This knowledge now falls within the scope of Section 1832(a) even if it cannot be readily identified in a particular product or service.

The amended EEA should further encourage businesses to clearly identify their key foundational processes and data, determine whether that information is protectable as a trade secret, and then take steps to ensure that the information is being treated as a trade secret.  By doing so, and therefore falling within the broadened protections of Section 1832(a), businesses gain a powerful new deterrent against the theft of their key intellectual property.

If you have any questions, please contact Robert Bleicher at rbleicher@carr-mcclellan.com or at (650) 342-9600.