United States: The US And EU Strengthen And Harmonise Protection Of Trade Secrets

In 2016, governments on both sides of the Atlantic adopted measures to address the unpredictability of trade secret protection across different jurisdictions.

In the United States, where trade secret laws differ by state, the Defend Trade Secrets Act (DTSA) officially became law on 11 May 2016 and created, for the first time, a federal private civil cause of action for trade secret misappropriation. In the European Union, where Member States likewise have a patchwork of laws with varying degrees of protection, the Directive on "the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure" was adopted on 8 June 2016. The Directive seeks to harmonise the laws of Member States to provide a minimum level of protection across the European Union.


The DTSA amends the Economic Espionage Act, which, when passed 20 years ago, provided for criminal prosecution of trade secret theft. Prior to the DTSA, civil actions for trade secret misappropriation were governed solely by state law. As a result, access to federal courts was not guaranteed, even in cases involving sophisticated cross-border misappropriation.

Notably, the DTSA does not preempt state law, so parties may still pursue state law claims. Although pursuing both state and federal claims could lead to more complexity, the DTSA and the laws of the 50 states, 48 of which have adopted some form of the uniform trade secrets act (UTSA), do at least share much in common. For example, there is substantial overlap in the DTSA and UTSA definitions of "trade secret" and "misappropriation."

Likewise, DTSA remedies are similar to UTSA remedies: injunctive relief, compensatory damages (in the form of actual damages, unjust enrichment, or reasonable royalties), enhanced damages for willful and malicious misappropriation (capped at twice compensatory damages), and lawyer's fees in cases involving bad faith or willful and malicious conduct. There are, however, some notable differences.

One key (and controversial) feature of the DTSA is its ex parte seizure provision. This is a new remedy not available under state trade secret laws. Under the DTSA, courts, per a plaintiff's expedited, unilateral request, may order law enforcement to seize property "necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action." This procedure is intended only for emergencies to prevent or mitigate immediate and irreparable injury when less severe procedures would be ineffective. This provision requires "extraordinary circumstances" and, if abused, can result in damages against the seizing party. To that end, the movant must post a bond sufficient to cover such damages if the seizure was unwarranted.

In addition, satisfying the threshold requirements for an ex parte seizure is not easy. A plaintiff must prove the defendant actually possesses the misappropriated information and must identify "with reasonable particularity" the property to be seized and its location. Once seized, that property remains safeguarded by the court pending an expedited hearing on the propriety of the seizure.

Another important aspect of the DTSA is the inclusion of employee mobility protections similar to protections in states that reject the "inevitable disclosure" doctrine. The DTSA restricts injunctive relief that would "prevent a person from entering into an employment relationship," requiring that such relief must be "based on evidence of threatened misappropriation and not merely on the information the person knows." The DTSA also explicitly seeks to avoid conflicts with already existing state employment laws, which is an area where disputes are expected to arise, given that the DTSA is likely to be asserted against former employees.

Finally, another employee protection feature of the DTSA is the immunity provided to whistleblowers who might disclose confidential information when reporting unlawful activities to government officials or as part of an anti-retaliation lawsuit. Under this provision, employers are required to provide notice to employees of this immunity protection in any agreement governing the use of trade secrets or other confidential information. Companies should therefore review and modify their standard employment and non-disclosure agreements to bring them into compliance with the DTSA.


In the European Union, Member States have different forms of protection against unlawful acquisition, use, and disclosure of trade secrets, notwithstanding some general standards on trade secrets provided by the Trade-Related Aspects of Intellectual Property Rights Agreement. The Directive goes further in harmonising civil rules in the European Union. Member States are, however, still permitted to offer more stringent protections not provided by the Directive, such as rules of criminal liability, as long as certain safeguards in the Directive are met.

The definition of a "trade secret" under the Directive is fairly similar to that under the DTSA. Under the Directive, a trade secret is information that meets three cumulative conditions: i) it is secret ii) with a commercial value iii) that has been subject to reasonable steps to be kept secret. Also similar to the DTSA is the fact that the Directive carves out whistleblower protections, allowing disclosure of trade secrets to protect the general public interest, i.e., for revealing misconduct, wrongdoing or illegal activity.

As with the DTSA, the Directive addresses several aspects of remedies. Important elements include the provisional and precautionary measures that may be requested by trade secret holders: i) the cessation or prohibition of the use or disclosure of the trade secret; ii) the prohibition of the production, offering, placing on the market, use, importation, export, or storage of infringing goods; and iii) the seizure or delivery of infringing goods. These measures are revoked, or cease to have effect, if the trade secret holder fails to institute legal proceedings leading to a decision on the merits within a reasonable period. If not otherwise specified, a "reasonable period" is one that does not exceed 20 working days or 31 calendar days, whichever is longer.

Definitive measures also may be requested, including the destruction of any documents containing the trade secret, or their return to the trade secret holder, or any other appropriate corrective measures, such as the recall of the infringing goods from the market, or their destruction.

Another significant element of the Directive concerns compensatory damages, which must be calculated by taking into account the negative economic consequences, including the trade secret holder's lost profits, unfair profits made by the infringer, and other elements such as the moral prejudice caused to the trade secret holder.

Finally, whereas the prospect of losing the confidentiality of a trade secret often dissuaded trade secret holders from defending their trade secrets, the Directive adds the possibility of restricting disclosure of trade secret information to hearings with a limited number of persons, as well as making available versions of judicial decisions in which the passages containing trade secrets have been removed.

The DTSA and the Directive both recognise the economic harm caused by trade secret theft. While DTSA claims are already being asserted in the United States, EU Member States have until 9 June 2018 to implement laws to comply with the Directive.

The US And EU Strengthen And Harmonise Protection Of Trade Secrets

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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