Defend Trade Secrets Act of 2016 Redefines Federal Approach

Last week, President Obama signed the Defend Trade Secrets Act of 2016 or DTSA into law. This new law provides the owners of trade secrets a private right of action against those individuals or entities who misappropriate trade secrets. This new law for theft of trade secrets must be brought in federal court within three years of the theft.

While there are other benefits of the DTSA, the most powerful arrow it adds to your quiver is a civil ex-parte seizure of property. In extraordinary circumstances, where you can show that an injunction alone will not be sufficient, you can actually petition the court to seize the property or trade secret you allege is in the control of the defendant. As expected, the threshold for this type of relief is extraordinarily high and requires you to describe with a high degree of specificity the location and description of the property to be seized. Once seized, a hearing will be held within seven (7) days of the seizure to determine if this was appropriate. As with injunctive relief, a bond must be placed with the court in case your allegations are ultimately not true.

This new law does not replace the various trade secret laws in each state, but rather provide a uniform approach at the federal level that is more in line with the protections for patents, copyrights and trademarks. Previously if a trade secret was stolen there may have been several states to choose from with regards to where a plaintiff might commence its lawsuits. Obviously, it would make sense to file in the state where the laws were the most favorable to the client. Now however, the newly enacted DTSA, being a federal law, will greatly curb against this type of abusive forum shopping.

When the case is over, the prevailing party will be entitled to loss due not only to the theft of the trade secret but also the unjust enrichment gained by the defendant. If the court finds the defendant’s conduct was willful, the court now has the authority to award double damages and attorney fees.

What this means going forward is, at a minimum, that employers should review their employment contracts and confidentiality and trade secret agreements. There are certain Notice provisions that must be given to employees for confidential disclosure of a trade secret to the government in a court filing. These protections for whistleblower type disclosures are required if you hope to recover attorney fees and exemplary damages. If you have any questions, please feel free to contact us at Danziger Shapiro, P.C.

This entry is presented for informational purposes only and does not constitute legal advice.