United States: New Federal Trade Secret Act Expands Trade Secret Rights

Trade secrets gained prominence as a federally protected form of intellectual property this week with the enactment of the Defend Trade Secrets Act of 2016 ("DTSA"). The DTSA provides federal civil protection against misappropriation of trade secrets. Victims of trade secret theft now have the right to assert federal claims of trade secret misappropriation in the federal district courts.

President Obama signed the DTSA into law on May 11, 2016. The Senate and the House of Representatives had overwhelmingly approved the new law, voting 87–0 and 410–2, respectively. The DTSA garnered bipartisan support based on the widely held belief that the law will aid American businesses in protecting their trade secrets in the global marketplace. The risk of trade secret misappropriation has never been greater due to the explosion of digitally stored information and the ease with which employees can use compact flash drives to take company trade secrets for improper purposes.

American industry lined up to support the DTSA by emphasizing its importance for protecting global competitiveness. More than 40 companies and industry organizations wrote Congress supporting the DTSA, and representatives from industry testified to the importance of the new law.

Highlights of the DTSA

The DTSA governs disputes over trade secrets that relate to a product or service used in, or intended for use in, interstate or foreign commerce.

The DTSA provides for all of the remedies typically available under state trade secret law, including injunctions, actual damages, unjust enrichment, royalties, exemplary damages, and attorneys' fees.

The DTSA also provides a new remedy of an ex parte civil seizure of property where the applicant seeks a seizure order without the other side being privy to the request. This civil seizure remedy has received substantial attention. Prompt seizure of property can aid in combating misappropriation and mitigating loss to companies. The DTSA allows a plaintiff to request that a district judge grant an order directing that federal law enforcement officials seize property when necessary to prevent the propagation or dissemination of trade secrets. The plaintiff must establish specific facts proving eight requirements: (1) inadequacy of an injunction or other equitable relief; (2) irreparable harm; (3) balance of harms favors the applicant; (4) likelihood of success; (5) the target possesses the trade secret and the property to be seized; (6) the request describes the property with reasonable particularity; (7) the target would destroy the property if the applicant proceeded with notice; and (8) the applicant has not publicized the requested seizure.

The statute further identifies requirements for the seizure order itself, including that it contain a statement of findings of fact and conclusions of law. Seizure orders must provide for the narrowest seizure of property necessary for the situation. Anyone harmed by a seizure order may file a motion seeking dissolution or modification of the order at any time. The DTSA contains many additional procedural rules governing civil seizures of property.

The DTSA expressly rejects the inevitable disclosure doctrine, which posits that a former employee will inevitably use a former employer's trade secrets at a new job. In contrast, the DTSA does provide for imposition of an injunction to stop threatened misappropriation. The DTSA allows the district judge to enjoin an individual "on such terms as the court deems reasonable." The DTSA provides, however, that an injunction cannot broadly prevent a person from entering into an employment relationship.

Individuals have immunity from liability for the disclosure of a trade secret if the disclosure is made in confidence to a government official or to an attorney for the purpose of reporting or investigating a suspected violation of the law. This immunity extends to disclosures made in a complaint or other document filed in a lawsuit if the filing is made under seal and in an anti-retaliation lawsuit. The DTSA imposes requirements on companies to provide notice of the immunity provisions in certain agreements governing use of trade secrets or other confidential information.

What Does the DTSA Mean for American Businesses?

Passage of the DTSA shows that trade secrets are taking greater prominence as a favored approach for intellectual property protection and as an alternative to patents. The DTSA also serves as a reminder that trade secret misappropriation remains a significant threat.

Companies should pay close attention to protection of their trade secrets. Under the DTSA, six types of information qualify as trade secrets: financial, business, scientific, technical, economic and engineering information. The DTSA identifies the following examples of trade secrets: patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing. Notably, some of these forms of trade secrets are ineligible for patent protection.

Companies should work to identify their trade secret assets and then assess whether they have adequate security controls over their trade secrets. In addition, companies should consider performing a complete audit of their trade secret protection programs to ensure that best practices are in place for guarding these important intellectual property assets. Companies also should take care to ensure that they are not improperly in possession of any third party's trade secrets.

Conclusion

Enactment of the DTSA is a milestone. Federalization of civil trade secret law serves many important functions. The federal courts are well equipped to adjudicate complex intellectual property cases, whether the inventions are patented or held as trade secrets. Federal subpoena power will assist parties in conducting discovery in trade secret cases, and the new seizure provisions will provide needed relief in appropriate cases. The federal courts can more adeptly oversee trade secret disputes that go across borders. Passage of the DTSA likely will lead to increased reliance on trade secret protection and a more uniform approach to the administration of trade secret disputes across the country—benefiting the nation's businesses and industries.

Companies need to ensure that their employment agreements and nondisclosure agreements provide the required notice regarding the immunity provisions of the DTSA. For information on steps for employers to consider in providing notice of the immunity protections in the DTSA, see Jones Day's Alert: "Federal Defend Trade Secrets Act of 2016 Imposes New Notice Obligations on Employers."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.