The Defend Trade Secrets Act Of 2016: Federal Jurisdiction For Trade Secret Litigation

The federal Defend Trade Secrets Act of 2016 (“DTSA”) was enacted on May 11, 2016, after it was unanimously passed by the Senate and ratified by the House in a 410-2 vote. The DTSA is not retroactive, rather it is effective for all applicable causes of action occurring after its enactment. The DTSA creates a federal cause of action for trade secret misappropriation. Trade secrets can encompass a wide variety of intellectual property, including processes, customer lists, sales methods, and formulas, as well as financial, scientific, and technical information and data. The definition of a “trade secret” under the DTSA is any information not generally known to the public that is subject to reasonable measures of protection by the owner (security measures, contractual protection, etc.). Trade secrets are entitled to protection as long as these requirements are present, being protected potentially forever.

The Uniform Trade Secrets Act (“UTSA”) has been adopted by 48 states, and the DTSA was enacted to minimize the inconsistencies between state laws under the UTSA, which differ slightly but can change the outcome of a case. However, the DTSA does not preempt, or overturn state law or the UTSA. Therefore, businesses can choose under which law to bring a cause of action for trade secret misappropriation. While the DTSA is similar to the UTSA, it differs in many regards. For example, the DTSA created an ex parte seizure procedure for use in extraordinary circumstances, protects whistleblowers from retaliatory accusations of trade secret misappropriation, and permits businesses to pursue misappropriation causes of action against foreign defendants.

In response to the enactment of the DTSA, businesses should consider updating employment and confidentiality agreements to disclose the whistleblower immunity provisions in the DTSA. If these provisions are not present, the business is not eligible to recover double damages or attorney fees in trade secret litigation. It is also important to inventory all trade secrets of the business and evaluate the protections in place to maintain the confidentiality of those secrets. Preventative measures are less costly and far more effective at protecting trade secrets than a reactive approach. Lastly, every business should develop response plans for suspected misappropriation and for receiving a seizure order, which will prevent unnecessary delays that can compromise your rights and cost your business dearly.

The primary effect of the DTSA is to federalize trade secret misappropriation causes of action and ensure full access to the federal courts for trade secret litigants. If you have any questions about the DTSA or intellectual property law in general, please contact the Law Offices of Tyler Q. Dahl for a free consultation.

Disclaimer: This material was prepared for general informational purposes only, and is not intended to create an attorney-client relationship and does not constitute legal advice. This material should not be used as a substitute for obtaining legal advice from an attorney licensed or authorized to practice in your jurisdiction. You should always consult a qualified attorney regarding any specific legal problem or matter.