The Defend Trade Secrets Act USC allows the owner of a trade secret to file a lawsuit in federal court when the trade secret has been taken without permission.

Federal Protection of Trade Secrets: The Defend Trade Secrets Act

Signed into law in 2016, the Defend Trade Secrets Act (DTSA) allows a lawsuit to be filed in federal court rather than state, as was previously the case. The addition of the DTSA does not replace state law, however, it allows the federal act and state protections to work harmoniously. It even allows for attorney fees and damages up to double the award if the misappropriation was malicious, similar to federal trademark counterfeiting cases.

Key Provisions

The DTSA was created as a federal civil cause of action, allowing for increased maximum criminal penalties and adding federal protections for trade secrets. The owner can seek nationwide relief with one suit rather than multiple actions in different states. Trade secret theft is now included as a federal cause of action where before state courts made determinations on claims.

It also allows for ex parte seizures in “extraordinary circumstances” in order to prevent leaking of the trade secret or additional exposure. Specific facts must be shown to support the need for such seizure. The court will make a determination and will issue an order for the narrowest seizure of property with minimal disruption of third-party operations or legitimate business operations of the accused person.

Remedies:

  • Traditional remedies are offered, including injunctions, awarding damages and reimbursement of attorney's fees.
  • Compensatory damages can be awarded for any actual loss that has occurred as well as for any profit earned from the misappropriation.
  • If maliciously misappropriated – the owner can be awarded up to two times the damages.

The DTSA includes a provision for immunity for individuals reporting a violation of law in certain situations when trade secrets are disclosed. If told in confidence to a government official while reporting a suspected violation, the individual will not be held liable. The DTSA also authorizes disclosure of trade secrets when disclosed to their lawyer in an anti-retaliation lawsuit, it is filed under seal, and is only disclosed by court order.

Explaining the Defend Trade Secrets Act

The DTSA was created as a federal cause of action. With no federal representation, companies that were seeking justice for trade secret misappropriation had to file suit in state courts where laws could be different from one state to another. Even the interpretation of “trade secret” was different depending on jurisdiction. The DTSA created a nationwide definition and outcome that is the same for every state.

A court may issue an order for civil seizure in order to prevent further leaks of the trade secret in question. Civil seizure is a preventative tool. The court then holds a seizure hearing where the accusing party must prove the facts of the accusation. The seizure is only in extraordinary circumstances. If found to be true, the court can order damages and attorney fees be repaid.

The DTSA protects whistleblower employees and provides immunity from any criminal or civil liability related to disclosure of the trade secret. Companies can seek attorney fees as well as monetary damages. They are responsible for advising employees of the whistleblower immunity and it is strongly suggested that companies include this information in policies and agreements with employees.

Emerging Trends in Defend Trade Secrets Act Litigation

Under the DTSA, an employer may file suit for the misappropriation of trade secrets related to interstate commerce. Information is protectable as a trade secret under the DTSA if the owner has made an effort to keep it a secret.

The DTSA provides a mix of treatments for misappropriation, which include civil seizure, injunctions, monetary awards for actual loss, repayment for unfair profits, royalties, additional damages, and attorney's fees.

The Interstate Commerce Requirement

If the trade secrets are used in interstate commerce, the DTSA will allow the claim. This is a change from state trade secret laws. However, this must be clearly stated in the original complaint.

The Inevitable Disclosure Doctrine

In the case of employment disclosures, a plaintiff can show the court that the defendant's new job would rely on the trade secrets in question as it is often a challenge to show employee disclosure. Competition between employers, the employee's new position as compared to their previous job, and any actions on behalf of the new employer regarding the trade secrets are part of the “inevitable disclosure doctrine” used to prove trade secret liability.

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