On May 11, 2016, President Barack Obama signed the Defend Trade Secrets Act (“DTSA”) into law. The DTSA provides a new federal court civil remedy for acts of trade secret misappropriation, among other key provisions. This is a major step forward in the protection of intellectual property in the United States, and not only because federal law now fully recognizes four types of intellectual property.
Traditionally, lawsuits for misappropriation of trade secrets have been fought in state courts, with 48 out of 50 states, including Illinois, having adopted different versions the Uniform Trade Secrets Act (UTSA). Additionally, state courts have developed their own individual jurisprudence for interpreting the already-varying state versions of the UTSA. This has resulted in inconsistencies across the country in the protection afforded to a company’s or individual’s trade secrets. These inconsistencies include such fundamental questions as to what constitutes a “trade secret” and what rises to the level of “misappropriation” of a trade secret. To remedy this, the DTSA has created a private right of action in federal courts that allows companies and individuals to seek relief nationwide without having to reconcile the various differences found under state laws.
Another significant portion of the DTSA is the section allowing for civil seizure of property “necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.” This is, obviously, the most controversial part of the new legislation. A party seeking the ex parte seizure will have to demonstrate that “extraordinary circumstances” exist which warrant such a relatively extreme remedy. Additionally, it is conditioned on the requirement that the “applicant has not publicized the requested seizure.” If an individual whose property has been seized suffers damages as a result of a wrongful or excessive seizure, DTSA provides that individual with a private right of action against the person who sought the seizure. Other available remedies available are: (1) an injunction; (2) award of damage; (3) an award of exemplary damages; and (4) an award of attorneys’ fees.
There is also a new whistleblower provision in the DTSA. This provision protects whistleblowers from criminal or civil liability for disclosing a trade secret if the disclosure is made in confidence either to a government official (directly or indirectly), or to an attorney, and if the disclosure is made for purposes of reporting a violation of the law. Employers also now have an affirmative duty to provide employees with notice of this new provision in “any contract or agreement with employee that governs the use of a trade secret or other confidential information.” The definition of “employee” is drafted broadly to include contractor and consultants as well. Employers can comply with this requirement by cross-referencing to a policy document provided to the employee that sets forth the employer’s previously established reporting policy for a suspected violation of law.
Due to some of the discrepancies between the DTSA and prior versions of the Uniform Trade Secret Act, it is possible that a plaintiff (the trade secret owner) can encounter the situation where the plaintiff can win under one law, but not under the other. Because trade secrets are arguably most companies’ most valuable intellectual property assets, knowing under which statute and in which forum to bring a lawsuit is extremely important to successfully resolving these cases. The attorneys at Rock Fusco & Connelly can help your business navigate this new legislation and protect your trade secrets.