Almost a year ago, the federal Defend Trade Secrets Act ( DTSA) was adopted to strengthen protection for businesses whose proprietary data and information is misappropriated despite its affirmative efforts to protect it. Note that last part: in order to be accorded protection, a business must take reasonable steps to protect its confidential information and trade secrets. These steps include at a minimum, password protection, confidentiality or non-disclosure agreements and limited physical and electronic access to sensitive information. The greater the value of the information, the more rigorous the protection efforts need to be.
In the first case litigated under the new law, a dispute involving a proprietary fig spread recipe, Dalmatia Import Group Inc v. Foodmatch Inc., 16 cv- 02767 (ED Pa Feb 24 2017), a contract manufacturer was terminated by the brand owner for poor performance. The bad intentioned contract manufacturer decided to continue making the product and selling it, brazenly using not only the proprietary and protected recipe in breach of its confidentiality and non-compete obligations, but also the brand name. The brand owner was able to bring a lawsuit under DTSA because it took the necessary steps to protect sensitive information with non-disclosure and non-compete agreements.
The takeaway is two-fold: first, recipes can be protected as trade secrets and subject matter giving rise to lawsuits under the new Federal Trade Secret law, and second, standard non-disclosure agreements and be enough protective effort to enable a lawsuit under the new law. This is great news for the food and beverage industry, including restaurants, breweries and other craft beverage producers. A minimal legal investment in standard agreement can pack are real punch in enforcement proceedings under the new Federal Trade Secret law.