United States: Defend Trade Secrets Act – A Budding Avenue For Trade Secret Enforcement

In June, agriculture giant Monsanto was the first to use the Defend Trade Secrets Act (DTSA) by filing a federal suit in the Eastern District of Missouri naming one former employee and a number of John and Jane Does as defendants.

The DTSA, 18 U.S.C. 1836, provides a federal civil action for filing a trade secret claim. Previously, the only federal relief was a criminal action under the Economic Espionage Act. One notable feature of the act is that it does not pre-empt traditional state law claims for trade secret misappropriation. In addition to providing a federal claim, the DTSA offers enhanced damages, ex parte seizure provisions and the ability to recover attorneys' fees. To take advantage of the act, employers must accept its whistleblower immunity provisions and provide notice to their employees of the availability of such immunity.

From an intellectual property strategy perspective, recent decisions limiting the scope of patent and copyright protection have increased the importance of trade secrets in an intellectual property portfolio. For example, the Supreme Court's Alice decision narrowing patentable subject matter relating to software has encouraged providing software as a service and maintaining source code as a trade secret. As a result, trade secret information often lies in the digital archives of companies, and increasingly, these archives are under attack from outside sources or through targeted recruitment of key employees. Monsanto's facts are just one example of such efforts to misappropriate trade secret information.

There, a data analyst within Monsanto's Climate division had access to proprietary software and algorithms used in digital tools sold by Monsanto to help farmers increase their productivity. On June 1, the employee resigned and turned in his company computers, stating that he was planning on moving back to Taiwan to care for his father. An inspection of the computer uncovered malware that exported data from Monsanto's system and concealed that activity from detection. The employee's login credentials continued to be active even after his resignation, suggesting that the malware allowed the employee to access proprietary data from external devices or provided access to a competitor. A follow-up interview with the employee revealed that he had been recruited by Mo Hailong to serve as director of Resource Management and Bioinformatics for a seed company in China. In its DTSA complaint, Monsanto noted that Mr. Hailong had pled guilty to a conspiracy to commit theft of trade secrets from Monsanto.

Given this information, Monsanto expressed great concern to the court that it had become the target of a coordinated and malicious attack to misappropriate and improperly use its trade secret information. It asked for the temporary restraining order to have its trade secret information returned and prevent further misappropriation. The request also sought identification of any data storage accounts, along with usernames and passwords for the accounts, to recover misappropriated information and to conduct an analysis to see if files had been transferred. The court granted all of the requested relief and set a zero bond finding minimal harm to the defendants.

The court issued its order one day after Monsanto filed its complaint and request for a temporary restraining order, demonstrating how effective the DTSA can be in providing speedy relief. If this case goes to judgment, it may provide useful information on how courts will apply the enhanced damage provisions of the DTSA, but the more controversial ex parte seizure and whistleblower provisions of the Act are not implicated by Monsanto's facts. Therefore, we will have to stay tuned to gain guidance on these aspects of the DTSA.

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.

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