DTSA Provides Hedge Fund Managers With Protection for Proprietary Trading Technology and Other Trade Secrets

On May 11, 2016, the Defend Trade Secrets Act (DTSA) became law. The DTSA provides a new and powerful – but complex – federal statute that hedge fund managers can rely upon to protect their trade secrets, including computer models underlying high-frequency and algorithmic trading. The statute also requires hedge fund managers to take affirmative steps in order to protect those trade secrets and obtain the full benefit of the new law. As discussed in prior articles, laws governing the protection of trade secrets and computer crimes are fueling significant interpretative debates. See “How Can Hedge Fund Managers Protect Themselves Against Trade Secret Claims?” (May 16, 2014); “Recent Developments Affecting the Protection of Trade Secrets by Hedge Fund Managers” (Oct. 25, 2013); “Protecting Hedge Funds’ Trade Secrets: What A Difference A Year Makes” (Apr. 19, 2012); and “Protecting Hedge Funds’ Trade Secrets: The Federal Government’s Enforcement of Criminal Laws Protecting Proprietary Trading Strategies” (Dec. 10, 2010). In a guest article, Sean R. O’Brien and A.J. Monaco, managing partner and associate, respectively, at O’Brien LLP, discuss how the DTSA is an extremely important step toward rectifying and clarifying some of those issues and explore questions raised by the new statute.

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