Call: 703.556.0411 |

The Defend Trade Secrets Act (DTSA) was signed into law by President Obama on May 11, 2016. Today, employers store most of their trade secrets on computers, where they are vulnerable to theft. The DTSA was enacted to address the increasing threat of misappropriation of trade secrets by hackers and greedy employees by creating a civil cause of action in federal courts. With the enactment of the DTSA, diversity of citizenship is no longer the dependent factor in bringing a claim in federal court.

This new law promotes forum shopping, where litigants choose the court where they believe their case is most likely to provide a favorable remedy. In turn, employers are now likely to implement forum selection clauses in their employment contracts to establish or restrict where trade secret disputes can be brought.

The DTSA provides a new remedy, enabling trade secret owners (employers) to request that a judge instruct the government to seize property of a third party for the purpose of preventing the dissemination of a trade secret. Although this remedy is possible, it is only to be applied in extraordinary circumstances where the employer can satisfy its burden of proof. Further, the DTSA provides a cause of action for individuals to recover damages for wrongful or excessive seizures. The DTSA also provides more remedies for litigants, who can seek actual damages, damages for unjust enrichment, and exemplary damages.

DTSA also offers federal whistleblower protections for employees. The DTSA requires employers “to update trade-secret provisions in employment contracts and employee handbooks to set forth procedures employees must follow to take advantage of the new employee immunity.” Under the DTSA, whistleblowers are given immunity for disclosing trade secrets to law enforcement agencies for the purpose of reporting suspected law-breaking activity. “Companies that fail to [provide notice of the immunity rules in employment contracts]… forfeit their new right to collect exemplary damages or attorneys’ fees from the employee for misappropriation of trade secrets.”

Prior to the DTSA, state law governed theft of trade secrets under the Uniform Trade Secrets Act (UTSA). The issue with the UTSA was that the law was applied inconsistently throughout the states that had adopted it. “State court interpretations of the Uniform Trade Secrets Act have been shaped by dominant industries in various states.” Further, state courts have varied in the ways that the term “trade secret” is actually defined. The DTSA has defined a trade secret broadly “to include all secrets ‘related to a product or service used in, or intended for use in, interstate or foreign commerce.’” Although the DTSA does not encroach upon existing state law, the goal of the DTSA is to provide a uniform federal standard that will trickle down and be applied uniformly to the state courts.

© 2017 General Counsel, P.C. | Website Development by atigro.com

Call: 703.556.0411 |