Episode Details

A Research Report by The Innovation Attorney

A. Executive Summary

Trade secret protection is the most widely used form of intellectual property protection in the United States, yet it receives far less attention than the patent system. The legal framework rests on two parallel pillars: the Defend Trade Secrets Act of 2016, codified at 18 U.S.C. Section 1836, which created the first federal civil cause of action for misappropriation, and the Uniform Trade Secrets Act, adopted in some form by forty-nine states plus the District of Columbia. Together, these statutes protect a broad category of commercially valuable information that derives its worth from remaining undisclosed, covering formulas, processes, customer lists, algorithms, and manufacturing methods that no other body of intellectual property law could reach.

The strategic significance of trade secret protection has grown substantially since 2014, when the Supreme Court’s decision in Alice Corp. v. CLS Bank International, 573 U.S. 208, made it materially harder to obtain patent protection for software, business methods, and algorithms. Companies that once pursued patent portfolios as a default strategy now weigh trade secret protection as an affirmative choice, not merely a fallback. The Coca-Cola formula, protected as a trade secret for well over a century, remains the most frequently cited example of this calculus: a patent would have disclosed the formula and expired within twenty years, while trade secret protection has lasted indefinitely.

Litigation under the DTSA has produced verdicts of historic scale. In December 2024, a Massachusetts federal jury awarded Insulet Corporation $452 million against EOFlow Co., Ltd., finding willful and malicious misappropriation of trade secrets related to the OmniPod insulin delivery device. The court subsequently reduced that award to $59.4 million to avoid duplicative recovery alongside a permanent injunction, but the case illustrated the full remedial power available under 18 U.S.C. Section 1836(b)(3). The central legal implication for businesses is clear: trade secret protection demands proactive investment in reasonable secrecy measures, because courts will not supply those measures retroactively.

B. Detailed Findings

The Statutory Framework

The federal trade secret system operates under two intersecting legal regimes. The Economic Espionage Act of 1996, codified at 18 U.S.C. Sections 1831 through 1839, established criminal liability for trade secret misappropriation, including a provision targeting theft for the benefit of foreign governments under Section 1831 and a broader commercial espionage provision under Section 1832. The Defend Trade Secrets Act of 2016 amended the EEA to add a federal civil cause of action under Section 1836(b), allowing trade secret owners to sue in federal district court without satisfying diversity jurisdiction requirements.

Prior to the DTSA, trade secret owners were limited to state court claims under their state’s version of the Uniform Trade Secrets Act. The UTSA, first promulgated in 1979 and amended in 1985, has been adopted in forty-nine states and the District of Columbia. New York remains the sole jurisdiction relying on common law trade secret principles, which developed through decades of decisions rooted in the Restatement of Torts. The UTSA defines a trade secret as information, including a formula, pattern, compilation, program, device, method, technique, or process, that derives independent economic value from not being generally known to or readily ascertainable by persons who could obtain economic value from its disclosure or use, and that is the subject of reasonable efforts to maintain its secrecy. The DTSA definition, at 18 U.S.C. Section 1839(3), tracks the UTSA language closely while adding specific reference to financial, business, scientific, technical, ec