Part 1 of this post, we began the discussion of what the Defend
Trade Secrets Act, passed in May 2016, really means for employers
in defending their trade secrets. In particular,
Part 1 addressed some of the "good" the DTSA offers
for employers, particularly: (1) a clear path to federal court, (2)
consistency in application, and (3) ex parte seizure orders. In
this Part 2, we address the rest of the good — five more
positive benefits of the DTSA for employers.
4. No Replacement/Preemption of Existing State
Laws. The DTSA is careful to emphasize that it is not
intended to replace or preempt existing state laws. As such, it is
purely an additional basis for remedying trade secrets
misappropriation which, at least in theory, has no impact on
existing remedies. In practice, courts are likely to analyze DTSA
claims together with any additional claims for trade secret
misappropriation brought under state law. Over time, courts will
likely view federal court interpretations of the DTSA as
influential upon how state law trade secrets claims should be
applied and interpreted.
5. No Obligation to Describe Trade Secrets with
Particularity. Identifying which particular trade
secret a former employee is using or disclosing can be
difficult—especially within a complaint or other initial
pleading very early in litigation involving a former employee who
has retained voluminous trade secrets following separation from
employment. Yet, many state laws require that trade secrets be
identified with such particularity that a defendant is permitted to
defend against only isolated allegations. Subject to federal
pleading requirements, the DTSA remedies this dilemma for
claimants, and, in doing so, likely creates opportunity for a
broader scope of discovery during litigation by employers regarding
which trade secrets were misappropriated.
6. International Application. As noted in
Part 1, the DTSA is actually an amendment to the Economic
Espionage Act ("EEA"). That detail is important because
the EEA includes provisions addressing its "applicability to
conduct outside the United States," and those provisions
appear to apply to the private causes of action created by the
DTSA. In particular, it appears that a U.S. organization (including
a corporation) or individual citizen/permanent resident can be held
liable under the DTSA for misappropriation even when all acts of
misappropriation take place outside the U.S. In addition, a
non-U.S. organization or citizen may also apparently be held liable
under the DTSA for foreign misappropriation so long as "an act
in furtherance of the offense was committed in the United
Significant Remedies, Including Injunctions, Damages and
Fees. Like the Uniform Act (mentioned in
Part 1), the DTSA provides for both injunctive relief and
damages. Specifically, the DTSA provides for injunctive relief to
prevent any actual or threatened misappropriation, provided that
the order does not (1) prevent a person from entering into an
employment relationship; or (2) otherwise conflict with an
applicable state law prohibiting restraints on the practice of a
lawful profession, trade or business. Like the Uniform Act, damages
may be measured by actual loss, the unjust enrichment of the
misappropriating party, or, in the alternative, a reasonable
royalty. Where the misappropriation is shown to have been willful
and malicious, double damages and attorneys' fees may also be
8. Increased Criminal Penalties. Although
criminal penalties have been available under the Economic Espionage
Act since before passage of the DTSA, the DTSA substantially
increases those penalties. Specifically, the DTSA increases the
maximum penalties for a criminal violation from $5,000,000 to the
greater of $5,000,000 or three times the value of the stolen trade
secrets to the organization, including the costs of reproducing the
In sum, there is much for employers to welcome under the DTSA.
In Part 3 of this series, however, we will examine various aspects
of the DTSA which present down-sides to employers and create
questions about its application in the future.
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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