On April 27, 2016, the Defend Trade Secrets Act (DTSA) passed the House of Representatives and went to President Obama’s desk, where it is expected to be signed. With that, trade secret misappropriation claims will exist under federal law and can be pursued in federal courts.
The DTSA will provide businesses with more effective new tools to protect their sensitive information from misappropriation. In the context of trade secrets, misappropriation is generally considered the acquisition of hidden information through some improper means . The broadly structured language of the DTSA extends its protection to “all forms and types of financial, business, scientific, technical, economic, or engineering information” so long as (1) the owner has taken reasonable steps to keep the information secret and (2) the information derives its value from that secrecy. The DTSA largely tracks the concepts of trade secrets that have long existed in most states. But under the DTSA, plaintiffs will be able to bring claims for misappropriation of trade secrets in federal court.
Previously, trade secrets have been an outlier in the world of intellectual property. Unlike copyright, patent and trademark claims, which receive the wider benefit and protection of federal court jurisdiction, trade secret claims have mostly been litigated in state court. The problem with this has been that, given the diffuse and global nature of business and commerce, state courts are often not the best venue for intellectual property claims. If a misappropriation occurs across state or national borders, a federal court is better suited to address such jurisdictional conflicts.
To gain access to the DTSA, and federal court jurisdiction, all that is required is that the “trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” This is generally a very low threshold, as most products and services these days are used or intended for use in at least interstate commerce – only the most localized of businesses would not be able to meet this minimal requirement.
The DTSA will confer on trade secret holders a greater ability to pursue misappropriation beyond the borders of the United States, and can even pursue remedies before the International Trade Commission. In addition, a secondary benefit gained from access to the federal court system is a potential for more uniform decisions and precedent than the more disparate and varied state courts decisions.
Another interesting development that the DTSA will usher in relates to injunction and damages. Injunctions are often sought in trade secret cases to prevent the information at issue from being disclosed. Previously, under the Uniform Trade Secrets Act (UTSA), which almost all states have adopted in some form or another, the injunction would end when the trade secret ceased to exist or after an amount of time necessary to stop any potential commercial advantage being gained from a misappropriation. The DTSA however contains no such limitation, which presumably will give courts more discretion in applying an extended injunction. Also, where the UTSA allows for double damages in cases of “willful and malicious misappropriation”, the language of the DTSA has upped this to treble damages.
Perhaps the biggest tool in the DTSA tool belt is the ability to seek ex parte civil seizures. What this means is that a plaintiff can, without giving a defendant notice, seek the seizure of property if the plaintiff can demonstrate that the defendant, or someone working in concert with the defendant, is likely to “destroy, move, hide, or otherwise make such matter inaccessible to the court”. This type of ex parte seizure is a powerful new tool that will likely allow trade secret holders to better combat harm associated with a misappropriation. And being a powerful tool, it may be subject to misuse among competitors.
Conkle, Kremer & Engel attorneys stay current on developments that may be important to their clients concerned about commercial and intellectual property issues. If you have questions about the DTSA or other aspects of trade secret or intellectual property protection, we would be glad to hear from you.