The Defend Trade Secrets Act and Religious Institutions

In 2016 Congress passed the Defend Trade Secrets Act (“DTSA”) in an effort to, among other things, further unify trade secret law.[1]  The DTSA was based largely on the Uniform Trade Secrets Act (“UTSA”) and created a federal civil action for those seeking redress in federal court for the misappropriation of a trade secret.  Despite this derivative relationship between the federal and state statutes, there are numerous differences in language between the DTSA and UTSA.  However, because the DTSA was passed so recently, courts have not had an adequate opportunity to parse out all of the differences between federal and state trade secret law.  Nevertheless, DTSA litigation is piling up,[2] and it is only a matter of time before federal courts must weigh in on the textual differences between the DTSA and the UTSA.

There is one particular difference in statutory language that could have considerable impact on the trade secrets of religious institutions.  Under the most recent version of the UTSA, any information can constitute a trade secret.  In defining a trade secret, the UTSA reads: “’Trade secret’ is any information, including a formula, pattern, compilation, program, device, method, technique, or process.” (emphasis added).  Uniform Trade Secrets Act § 1(4).  Thus, under the UTSA, the types of information that can constitute a trade secret are an open class — there are no particular categories of information that are either included in or precluded from the UTSA’s definition of a trade secret.

The DTSA’s definition of a trade secret, on the other hand, is “all forms and types of financial, business, scientific, technical, economic, or engineering information.”  18 U.S.C. § 1839.  Thus, under the DTSA, only these six categories of information can constitute a trade secret.  Under the plain reading of the statute, any information that does not fall under the rubric of financial, business, scientific, technical, economic, or engineering information cannot be a trade secret.  While these categories are certainly expansive, they are not all-encompassing.  There are various types of information that a judge interpreting the plain language of the statute would find difficult to include under the DTSA’s definition of trade secret.

Specifically, there may be various trade secrets of religious institutions that do not fit neatly into these categories.  Imagine, for example that a religious institution claimed that certain of its most secret scriptures were trade secrets.  Such a trade secret does not seem to fit into any of the categories of information listed in the DTSA as eligible for trade secret status.  And lest one think that no religious institution would make such a claim, the Church of Scientology litigated that exact issue in Religious Tech. Ctr. v. Netcom On-Line Commc’n Servs., Inc., 923 F.Supp. 1231 (N.D. Cal. 1995).  Furthermore, based on the language cited in Religious Tech. Ctr., it seems clear that the Court would have considered the scriptures eligible for trade secret status under the UTSA.[3] Although the Court in that case ultimately held that the scriptures were not trade secrets, the judges made it clear that religious institutions are not precluded from owning trade secrets.  Religious Tech Ctr., 923 F.Supp. at 1251.  However, the language of the DTSA is explicit that there are only six categories of information that are eligible for federal trade secret protection with all others being excluded from consideration.  Thus, under the DTSA, it is very possible that a federal judge would have found that the religious scriptures in Religious Tech. Ctr. were not even eligible for trade secret status; religious scriptures are not obviously financial, business, scientific, technical, economic, or engineering information.

Although there is a straight path from the text of the DTSA to precluding information like religious scripture from trade secret protection, it stands to reason that Congress intended no such discrepancy between federal and state trade secret law.  In fact, the legislative history of the DTSA supports this conclusion.[4] Thus, a federal judge that gives more weight to legislative history might seek to twist the language of the statute in a way that would conform federal law to state law.  However, without any linguistic acrobatics, a more textually-minded judge would be hard-pressed to consider certain secrets of religious institutions eligible for federal trade secret protection.  As DTSA litigation plays itself out over the next few years, courts will opt to either exaggerate or minimize the differences in language between the federal and state statutes.  In the meantime, however, I would suggest that religious institutions be wary of disclosing their most sacred secrets to anybody with a penchant for trade secret misappropriation.

[1] “Our Defend Trade Secrets Act creates a single national baseline, or a minimal level of protection, and gives trade secret owners access to both a uniform national law and to the reach of the Federal courts.”) (remarks of Senator Coons).  162 CONG. REC. S1630.

[2] As of Spring 2018, there were a total of 486 federal DTSA cases.  David S. Levine & Christopher B. Seaman, The DTSA at One: An Empirical Study of the First Year of Litigation Under the Defend Trade Secrets Act, 53 Wake Forest L. Rev. 105, 124 (2018).

[3] California’s version of the UTSA was not yet enacted at the time this case was decided, so the Court based its decision on § 757 in the Restatement of Torts, which states that there is “no category of information [that] is excluded from protection as a trade secret because of its inherent qualities.”

[4] “The Committee does not intend for the definition of a trade secret to be meaningfully different from the scope of that definition as understood by courts in States that have adopted the UTSA.” S. Rep. No. 114-220, at 10 (2016); H.R. Rep. No. 114-529, at 14 (2016).

 

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