Trade Secret Law: Defend Trade Secrets Act Creates Federal Right of Action for Trade Secret Misappropriation.


Earlier this month, the Defend Trade Secrets Act (“DTSA”) became federal law. The DTSA grants the owners of trade secrets the right to sue in federal court 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.” Previously, protection of trade secrets was offered only under state law, with most states having adopted a version of the Uniform Trade Secrets Act (“UTSA”). The new federal law will supplement, not replace, those state laws.

The DTSA, while it mirrors the UTSA in many respects, adds several notable elements. In addition to creating original jurisdiction in federal district court over civil actions brought under the law, the DTSA also provides for the ex parte seizure of property where necessary to prevent the disclosure of the trade secret at issue in the lawsuit. This seizure is permitted only in “extraordinary circumstances,” including those situations where immediate and irreparable injury to the plaintiff will result if the seizure is not ordered. The party requesting an ex parte seizure must post security and, in cases where such a seizure is obtained wrongfully, the DTSA makes damages available to the defendant. Moreover, the Act recognizes the problem of international trade secret theft. The provision allowing for ex parte seizure of property is “expected to be used in instances in which a defendant is seeking to flee the country.”

The DTSA also includes a provision permitting the entry of an injunction prohibiting a person from accepting employment if there is a sufficient threat of misappropriation of a trade secret. In lesser cases, the individual may begin employment but will be subject to conditions enunciated by the court.

In those instances where a trade secret is found to have been misappropriated, the DTSA provides the payment of restitution of the actual losses caused by the misappropriation. Where a trade secret has been willfully and maliciously misappropriated, the court may order punitive damages up to two times the amount of the actual losses.

The Act also provides additional protection for whistleblowers, as blogged previously blogged about here.

This article is for informational purposes only and should not be construed as legal advice. Please contact your attorney for advice about your specific situation.

Contact Information