Tuesday, March 3, 2009

Bill Filed in Illinois State Senate Proposes Amendments to Trade Secrets Act

Illinois, like most other states, has adopted a version of the Uniform Trade Secrets Act. That statute took effect in 1988. Twenty years later, it may be in for some revisions.

Senator Don Harmon (D-Oak Park) last week introduced Senate Bill 2149 to amend the Trade Secrets Act in a number of respects. The proposed changes focus mostly on procedural issues and entitlement to attorneys’ fees:

(a) An order of injunctive relief must specifically identify the trade secrets at issue, but confidentiality will be preserved. This would eliminate the problem of vague injunction orders.

(b) The most significant change is that a party asserting a trade secrets claim must submit a written statement of the trade secrets it contends have been misappropriated before commencing oral or written discovery, though amendments to the written statement can be made upon good cause shown. Presumably, this would allow a statement to be amended if discovery reveals theft of trade secrets not suspected or initially disclosed by the plaintiff.

(c) The trade secrets statement will be admitted as substantive evidence at trial and shall be conclusive as to the identity of the alleged misappropriated secrets.

(d) The prevailing party in a trade secrets case will be entitled to attorneys’ fees as of right. Right now, either a showing of willful misappropriation or bad faith prosecution of a claim is required for fee-shifting.

(e) Attorneys’ fees also must be awarded in specifically enumerated circumstances. For instance, a party who submits an overbroad or objectively unreasonable trade secrets statement will be responsible for reimbursing attorneys’ fees related to that issue, and a party who resists a motion to dissolve an injunction in bad faith also must pay attorneys’ fees related to the motion for dissolution.

(f) An award of attorneys’ fees may be awarded in other enumerated circumstances. For instance, a party may be held responsible for fees if an injunction order is modified or if it maintains an “objectively specious” damage claim. Fees also may be awarded if a defendant succeeds in obtaining a more definite trade secrets statement by court order.

The proposed amendments would seem to ameliorate discovery abuse and vague trade secrets claims, and potentially deter damages suits that have no basis in fact. It also codifies the requirement that an injunction must put a defendant on notice of what s/he is prohibited from disclosing. From the plaintiff’s side, the prevailing party fee provision is a significant addition to make whole those aggrieved by misappropriation of trade secrets.

The most significant change, though, concerns the trade secrets statement that must be served at the outset of the case – much like a Rule 26(a)(1) disclosure pleading. This would require a plaintiff to put the defendant on notice of what is at issue in a trade secrets action before starting the expensive process of discovery. Since it can be amended only upon leave of court, this would require a trade secrets plaintiff to think through its claim carefully prior to instituting litigation. A similar procedural scheme is in place in California.

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