On May 11, 2016, President Barack Obama signed into law the Defend Trade Secrets Act (“DTSA”).
Effective immediately upon signing, the DTSA expands the Economic Espionage Act of 1996 and
provides rights for individuals and corporations for civil causes of action under US federal law, as well as creates new remedies and relief regarding trade secret protection.
IMPACT OF THE DEFEND TRADE SECRETS ACT
At its highest level, the DTSA creates a federal cause of action for misappropriation of trade
secrets or conspiracy to misappropriate trade secrets. Trade secrets are information that are
generally unknown to the public. In addition, reasonable measures must be taken to keep the
information secret. Misappropriation of trade secrets may take many forms, including acquiring a trade secret by improper means or disclosing or using a trade secret that one knows or should know has been improperly acquired.
The DTSA does not overturn, overwrite, or preempt state trade secret laws but rather provides a separate avenue for trade secret claims and direct access to federal courts. Therefore, federal trade secret claims may be ﬁled along with state trade secret claims, providing another route to recovery for the plaintiff. By providing for federal jurisdiction, the DTSA helps to bring trade secret law alongside the other federally protected intellectual property ﬁelds of patents, copyrights, and trademarks.
COMPANIES MUST REACT TO IMPROPER CONDUCT
Civil actions under the DTSA come with a three-year statute of limitations that begins to run at the discovery of the misappropriation (or when discovery should have reasonably occurred).
Continuing misappropriation counts as a single misappropriation for purposes of calculating the statute of limitations. In other words, someone who misappropriates a trade secret does not “reset the clock” by continuing the offending conduct. This treatment is an important contrast with patent and copyright law.
REMEDIES AND RELIEF AVAILABLE
Remedies for civil liability under the DTSA include damages and injunctive relief. Damages may be calculated as actual losses and unjust enrichment, or may take the form of a reasonable royalty. If the misappropriation rises to being willful and malicious, then enhanced damages may be awarded, up to double the above amounts, in addition to attorney’s fees. Bad faith by either party may also provide a basis for attorney’s fees.
One important aspect of the DTSA is a new form of relief: ex parte seizure of trade secret
materials. That is to say, the DTSA allows an aggrieved party to request the seizure of trade
secret materials from an accused party without ﬁrst providing notice to that party. To
warrant seizure, the court must ﬁnd that it clearly appears from the facts that: (1) injunctive relief would be inadequate; (2) immediate irreparable injury will occur if seizure is not ordered; (3) any “harm” that would be caused by a seizure is favorable on balance; (4) the applicant is likely to succeed in showing that (a) the information to be seized is a trade secret, and (b) the accused party misappropriated or conspired to misappropriate the trade secret; (5) the accused party has actual possession of the trade secret and any property to be seized; (6) the application for seizure is reasonably particular with regard to the material to be seized and its location; (7) the accused party would destroy, move, hide, or otherwise make the material inaccessible if given prior notice; and (8) the applicant has not publicized the requested seizure.
It is important to note that seized material is held in the custody of the court and is
inaccessible by either party. Within a week of the seizure, a court hearing is held for the
aggrieved party to demonstrate that the seizure is the appropriate course of action. Parties who are the target of such an order may ask for dissolution, modiﬁcation, and – in the case of a wrongful seizure – damages. Since this procedure is new, courts likely will be cautiously treading new ground as the ﬁrst requests for ex parte seizure trickle in.
IMPORTANT IMPLICATIONS FOR BUSINESSES
The DTSA carves out additional protections for employer-employee relationships; in particular,
businesses cannot obtain an injunction under the DTSA that prevents a former employee from seeking employment elsewhere. The new law also includes a whistleblower immunity provision for
employees who conﬁdentially share trade secrets with the government for reporting a
violation of law, or who reveal trade secrets in a legal complaint or legal proceeding document. Moreover, the DTSA’s employee notice provision speciﬁcally prevents employers from seeking enhanced damages or attorney’s fees against employees if the employer has not provided notice of the above immunity to those employees.
It continues to be vital for businesses, as part of any successful trade secret strategy, to
identify commercially important secret information and maintain its secrecy. As part of any
successful trade secret strategy, businesses must identify that intellectual property and adopt policies and procedures to maintain its secrecy.
If you have questions about how the law will impact you or your business, please contact an
attorney at The Webb Law Firm: firstname.lastname@example.org.