The Defend Trade Secrets Act

May 24th, 2016
Patents/IP, Recent Legal News

By Jonielle D. Turner

The Defend Trade Secrets Act of 2016 (DTSA) – arguably the most significant change to U.S. intellectual property laws in the past decade – was signed into law by President Obama on May 11, 2016. The DTSA creates a federal, civil remedy for misappropriation of a trade secret that is related to a product or service used in, or intended for use in, interstate or foreign commerce. There are a wide range of remedies available for plaintiffs under the DTSA, including seizure of property, injunctive relief and damages. Note that although the DTSA creates a federal cause of action for trade secret misappropriation, it does not preempt state law, but rather, operates in parallel with state law.

Available Remedies

Below is a list of the federal, civil remedies available under the DTSA for trade secret misappropriation.

  1. Civil Seizure of Property. A court may, in extraordinary circumstances, order the civil seizure of property from the party accused of misappropriation to the extent necessary to prevent the reproduction or dissemination of the trade secret that is the subject of the action, which the court may order as preliminary relief in advance of any ruling on the merits of the claim. 
  2. Equitable Remedies. The DTSA authorizes federal courts to grant injunctive relief to prevent any actual or threatened misappropriation provided that the order does not: (i) prevent a person from entering into an employment relationship, and that any conditions placed on such employment must be based on evidence of threatened misappropriation and not merely on the information the person knows; or (ii) otherwise conflict with an applicable state law prohibiting restraints on the practice of a lawful profession, trade or business.
  3. Damages. Finally, plaintiffs may be awarded compensatory damages based on actual loss and unjust enrichment caused by the trade secret misappropriation or a reasonable royalty for the trade secret’s use or disclosure. Punitive damages of two times the amount of damages and attorneys’ fees may be available where there is proof of “willful and malicious” misappropriation.

Whistleblower Protection

The DTSA provides that an individual shall not be held criminally or civilly liable under any federal or state trade secret law for disclosing a trade secret (i) in confidence to a federal, state or local government official or to an attorney and solely to report or investigate a suspected violation of law, or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filling is made under seal.

Employer Compliance Obligations

Beginning May 12, 2016, employers must provide its employees, independent contractors and consultants with notice of the whistleblower protection afforded under the DTSA by including such notice in any contract or agreement with such individuals that governs the use of trade secrets or other confidential information. Failure to do so could deprive the employer of any right to punitive damages or attorneys’ fees in an action against an employee to whom notice was not provided. Therefore, all employers must update their form agreements governing the use of trade secrets or other confidential information to include the mandatory notice of immunity from liability for certain confidential disclosure of a trade secret. Agreements that likely need updating include employment agreements, employment covenants agreements, independent contractor agreements, and confidentiality and non-disclosure agreements.

Statute of Limitations

A civil action under DTSA must be commenced within 3 years after the date on which the misappropriation with respect to which the action relates is discovered or by the exercise of reasonable diligence should have been discovered.