United States: "Defend Trade Secrets Act" Signed Into Law Effective May 11, 2016

The Defendant Trade Secrets Act of 2016 ("DTSA"), was signed into law by President Obama on May 11, 2016. The new statute creates broad private federal cause of action for trade secret misappropriation and has been hailed as "the most sweeping change to the nation's intellectual property laws in a generation or more."1 Under DTSA, relief not generally available under prior law will now be permitted, such as ex parte seizure orders. DTSA also includes new requirements, such as the requirement that employers provide employees with notice of immunities available under DTSA in order to preserve their rights to certain relief. Accordingly, clients need to review their current policies and procedures, not only to ensure compliance with DTSA requirements, but to maximize the enforceability of trade secrets as part of their overall IP protection strategy.


One goal of DTSA was to stem the growing tide of trade secret theft. A 2013 report referenced during DTSA legislation reported that losses due to trade secret theft could be measured in the hundreds of billions of dollars and in millions of jobs.2 Foreign entities, through cyberespionage and other means, were increasingly the culprits.3 That same year, Attorney General Eric Holder said, "There are only two categories of companies affected by trade-secret theft: those that know they've been compromised and those that don't know yet."4

Another goal of DTSA was to bring uniformity to trade secret civil litigation by allowing cases to be brought in federal court under DTSA if "the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce."5 Prior to DTSA, most states had adopted the Uniform Trade Secrets Act of 1985 ("USTA"). However, various states and state courts modified or interpreted USTA provisions differently, resulting in a hodgepodge of state laws and enforcement results. While DTSA provisions largely mimic provisions of the USTA, there are differences.

While the future impact of DTSA is debatable, the need for companies to understand DTSA and to protect their trade secrets is not. This is especially true in light of the increasing theft of trade secrets. As explained below regarding specific DTSA provisions, companies should use the enactment of the new statute as an opportunity to review their trade secret portfolios and protection practices in light of DTSA, and take action accordingly to fully protect their trade secrets.

Key Provisions:

Ex Parte Seizures. The most controversial difference between UTSA and DTSA is that DTSA empowers federal courts, "in extraordinary circumstances," to issue an ex parte order – i.e. without notice to the alleged thief – "providing for the seizure of property necessary to prevent the propagation or dissemination of the trade secret." 6

The need for such a remedy was based, at least in part, on the testimony of industry insiders. For example, one pharmaceutical company representative testified that they "often run into situations" where, after an employee has left, the company finds there has been a download of documents containing trade secrets from that employee's computer.7 The representative testified that a seizure provision would allow the company to "go to Federal court and in one action kick out an ounce of prevention rather than worrying about a pound of cure a week or two later, when we can get the ... State courts involved[.]"8

Accordingly, it is imperative that companies institute practices to detect trade secret misappropriation as soon as possible. Given the right set of circumstances, this will then allow them to seek and obtain an ex parte seizure order in order to minimize the damaging effects of such a theft. This is especially important at present, when trade secrets can be easily disseminated through electronic means.

Immunity Notice Requirements. Another difference between existing state law and DTSA is that under DTSA, "[a]n individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret" in certain situations.9 Specifically, such immunity is granted to individuals that (1) disclose a trade secret in confidence to a government official or an attorney solely to report or investigate a violation of the law, (2) disclose a trade secret to an attorney or in court proceedings in connection with a lawsuit alleging retaliation by an employer for reporting a suspected violation of the law, and (3) disclose or use a trade secret in any lawsuit filing, as long as filed under seal.

In the event such an individual is an employee, and the employer does not provide appropriate notice to such person of the availability of such immunities, that employer cannot be awarded exemplary damages (up to two times actual damages), or attorney fees, in a trade secret suit against any such person to whom such notice was not provided.10

Specifically, DTSA provides that for an employer to preserve its rights to exemplary damages and attorney fees, the employer "shall" provide notice to an employee of his or her immunity rights "in any contract or agreement with an employee that governs the use of trade secret or other confidential information," or by cross-referencing a policy document provided to such employee.11 Employers should know that DTSA defines "employee" to "include[] any individual performing work as a contractor or consultant."12 This requirement is for all agreements entered into or updated after DTSA enactment, i.e., after May 11, 2016.13

Accordingly, companies should take immediate steps revise all contracts or agreements (1) that relate to trade secrets or other confidential information, (2) with any employee, contractor, or consultant, and (3) that are to be entered into or updated after May 11, 2016.

Employee Mobility. Under the "inevitable disclosure doctrine" employed by many state courts, employers have been able to enjoin employees from taking a new job merely because of what they knew – without any evidence of actual misappropriation – by showing that the new job would inevitably lead to a disclosure of the employer's trade secrets. Under DTSA, a court cannot "prevent a person from entering into an employment relationship, and that conditions placed on such employment shall be based on evidence of threatened misappropriation and not merely on the information the person knows."14

Given the increased right of employment mobility provided under DTSA, it is important that companies revisit their employee practices. Not only should employee agreements be reviewed, companies should institute appropriate employee exit strategies. For example, reminding a departing employee of their trade secret obligations should be part of every exit interview, preferably coupled with a written acknowledgement of such obligations signed by the departing employee. As another example, the employee's next employer should be contacted in writing and warned that the employee is restricted from disclosing or using trade secrets relating to certain areas of knowledge such as manufacturing, formulas, customers, etc. This prevents the next employer from later claiming innocent use of any such trade secrets.

DTSA Does Not Preempt State Law. DTSA specifically provides that it does not preempt state trade secret law. Accordingly, DTSA will add to the complexity of trade secret litigation. As an example, a plaintiff may now choose to bring trade secret civil litigation under DTSA, under state law, or both -- depending upon which strategy is the most advantageous.

Further, because decisions under DTSA will be made by federal district court judges in each state, it can be presumed that DTSA provisions will not only be interpreted differently between such judges, but that such judges may be pre-disposed or influenced by the pre-existing state laws and precedents of their jurisdiction.

Accordingly, companies should work with legal counsel in determining how differences between existing state laws and DTSA may work to their advantage. For example, DTSA defines what constitutes a trade secret differently than, and arguably broader than, the definition provided under state law. Accordingly, companies may need to reevaluate their confidential information, and whether it should be guarded under trade secret precautions.

More importantly, state trade secret law under UTSA requires that in order confidential information to be maintained as a trade secret, it must be "the subject of efforts that are reasonable under the circumstances to maintain its secrecy."15 DTSA, on the other hand, requires that the "owner thereof has taken reasonable measures to keep such information secret."16 While it is unlikely that DTSA will be interpreted to require different measures to keep such information secret, this is a good time for companies to revisit the measures they do use. This is critical because confidential information qualifies as a trade secret only if appropriate measures are taken to keep it secret, such as by (1) restricting access to such information, (2) using contracts to restrict employees and others from using or disclosing such information, and (3) providing notice to others of their trade secret obligations. Examples of each would be (1) using passwords to restrict electronic access to trade secrets, (2) using appropriate nondisclosure agreements, and (3) again, instituting employee exit interview strategies in order to place exiting employees, and their future employers, on notice of their trade secret obligations.

Practice Points:

In enacting DTSA, Congress recognized the ever-increasing importance of trade secrets in the competitive global marketplace. DTSA also reflects a recognition of the limitations inherent in using patents to protect certain key intellectual property; including continuing uncertainties concerning the patent eligibility of some technologies. DTSA is a significant attempt to address the uneven application of trade secret protection under state laws and the difficulty in enforcing trade secrets in foreign venues.

Given the extreme value of trade secrets, and the growing threat of trade secret theft, it would behoove businesses to reassess and audit their trade secret protection practices in light of DTSA, and take appropriate steps to protect those trade secrets. In order to get the most out of the new enforcement options in DTSA, clients must make sure that their policies and procedures meet the requirements of the Act, and also serve to maximize the protection of trade secrets and other IP assets.

This includes, for example, revising all contracts or agreements relating to trade secrets or other confidential information with any employee, contractor, or consultant to provide the notices required by DTSA. In addition, companies should evaluate their policies concerning restrictive covenants and non-competition agreements to ensure that they are appropriate and meet the requirements of state law. Finally, clients should audit their current practices for safeguarding trade secrets and confidential information to make sure that the information is protected from recent advances in cyberespionage, and also to enhance the ability to win in litigation in the event that, despite those precautions, trade secrets are misappropriated or fall into the hands of a competitor.


1 Maxwell Goss, What the Defend Trade Secrets Act Means for Trade Secret Defendants, PatentlyO, (May 5, 2016), http://patentlyo.com/?s=defend+trade+secrets+act.

2 The IP Commission, Report Of The Commission On The Theft Of American Intellectual Property, 11 (May 2013), http://www.ipcommission.org/report/IP_Commission_Report_052213.pdf.

3 Id. at 3.

4 S. Rep. No. 114-220, at 2 (2016).

5 18 U.S.C. § 1836(b)(1); DTSA § 2(a).

6 18 U.S.C. § 1836(b)(2)(A)(i); DTSA § 2(a).

7 Economic Espionage And Trade Secret Theft: Are Our Laws Adequate For Today's Threats? Before S. Comm. on the Judiciary, 113th Cong. (2014) at 15 (statement of Douglas K. Norman, Eli Lilly & Co.)

8 Id.

9 18 U.S.C. § 1833(b); DTSA § 7.

10 18 U.S.C. § 1833(b)(3); DTSA § 7.

11 Id.

12 18 U.S.C. § 1833(b)(4); DTSA § 7.

13 DTSA § 2.

14 18 U.S.C. § 1836(b)(3)(A); DTSA § 2.

15 UTSA § 1(4)(ii).

16 18 U.S.C. § 1839(3)(B); DTSA § 2.

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.

In association with
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
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.


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.


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.


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.


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.


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.


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.