United States: Trends & Insights: The Defend Trade Secrets Act Nine Months Later

It has been nine months since enactment of  the Defend Trade Secrets Act (DTSA) (18 U.S.C. § 1832, et seq.), which amended the Economic Espionage Act of 1996 (18 U.S.C. § 1831, et seq.) and created a new federal civil cause of action for misappropriation of trade secrets. Since that time, hundreds of DTSA claims have been filed throughout the country, often with parallel state law claims (the DTSA does not preempt state law). The initial wave of DTSA litigation suggests a number of trends: (1) interestingly, and despite the creation of a new federal cause of action, the number of misappropriation cases filed in federal court have not increased; (2) the new ex parte seizure process has been used sparingly; (3) temporary restraining orders (TRO) and efforts to seek "expedited discovery" remain the most common forms of pre-trial relief; and (4) open questions remain as to the scope and application of the DTSA.   

DTSA Filing Trends

The number of misappropriation claims filed in federal court has not increased since enactment of the DTSA. A survey of cases filed in federal court in the year preceding the DTSA shows approximately 500 cases filed with at least one cause of action asserting a claim for misappropriation of trade secrets under state law. In the nine months following enactment of the DTSA, approximately 227 cases have been filed asserting a claim for trade secret misappropriation under either the DTSA and/or state law, with the greatest number of cases being filed in the Northern and Central Districts of California, the Southern District of New York, and the Northern District of Illinois. Whether and to what extent filings under the DTSA increase in the future remains to be seen.

Ex Parte Seizure Orders - Few and Far Between

A unique feature of the DTSA is that it allows the owner of a trade secret to apply ex parte for an order directing the seizure of property "necessary to prevent the dissemination of the trade secret that is the subject of the action." 18 U.S.C. § 1836(b)(2)(A)(i). But less than a dozen applications for seizure have been requested in the hundreds of DTSA cases filed, and courts have been reluctant to grant such relief. Courts generally have concluded that the moving party has failed to allege facts sufficient to satisfy the DTSA's seizure requirements. See Jones Printing LLC v. Adams, 1:16-cv-442 (E.D. Tenn. Nov. 3, 2016). At least one court has in part granted an ex parte seizure request under 18 U.S.C. § 1836(b)(2)(A)(i). Mission Capital Advisors LLC v. Christopher D. Romaka, Case No. 1:16-cv-05878-LLS (S.D.N.Y. Jul. 29, 2016) (denying request for broader seizure order, but granting seizure of contact list). Other courts, including the Western District of Washington, the Southern District of Florida, and the Eastern District of Michigan, have granted seizures under more common forms of pre-trial relief, such as expedited discovery and TROs. See Earthbound Corp., MiTek USA, Inc., 2016 WL 4418018, *11 (W.D. Wash. Aug. 19, 2016) (granting seizure of property under TRO and expedited discovery requests); Baleria Caribbean Ltd., Corp. v. Calvo, 16 2330-CIV-WILLIAMS (S.D. Fla. Aug. 5, 2016) (granting ex parte application for a seizure order as a form of expedited discovery); Dazzle Software II, LLC, et al. v. Kinney, 16-12191 (E.D. Mich. June 15, 2016) (denying application for seizure order, but permitting "expedited discovery"). Thus, expedited discovery and TROs remain the most commonly granted forms of pre-trial relief under the DTSA. See Trulite Glass and Aluminum Solutions, LLC v. Smith, 2016 WL 5858498, *2 (E.D. Cal. Oct. 6, 2016) (granting TRO); Allstate Ins. Co. v. Rote, 2016 WL 4191015, *7 (D. Or. Aug. 7, 2016) (same); OOO Brunswick Rail Management v. Sultanov, 2017 WL 67119, *3-4 (N.D. Cal. Jan. 6, 2017) (same).

Additional TRO Trends

A survey of TROs granted in conjunction with DTSA claims reveals courts are concerned with: (1) the degree to which a TRO might inhibit a defendant's ability to work; and (2) the sensitivity of the information misappropriated. Where there is a non-compete agreement in place, courts have granted a TRO as a means of enforcing the agreement. See, e.g., Allstate Insurance Company v. Rote, 2016 WL 4191015, *5 (D. Or. Aug. 7, 2016); Engility Corporation v. Daniels, 2016 WL 7034976, *11 (D. Colo. Dec. 2, 2016). That said, courts may permit defendants to continue to solicit customers where appropriate. See, e.g., Free County LTD v. Drennen, 2016 WL 7635516, *7 (S.D.N.Y. Dec. 30, 2016) (granting TRO to prevent defendants from disseminating information, but denying request that defendants be prohibited from soliciting customers); Henry Schein, Inc. v. Cook, 191 F. Supp. 3d 1072, *1079 (N.D. Cal. June 10, 2016) (granting TRO except for prohibition on solicitation of customers). Some courts have issued a TRO where personal identifying information is at issue. See, e.g., OOO Brunswick, 2017 WL 67119 at *3; Unum Group v. Loftus, 2016 WL 7115967, *3-4 (D. Mass. Dec. 6, 2016).

Extraterritoriality

The DTSA expressly applies to conduct outside the United States if: (1) the offender is a natural person who is a citizen or permanent resident alien of the United States, or an organization organized under the laws of the United States or any of its states; or (2) an act in furtherance of the offense was committed in the United States. 18 U.S.C. § 1837. No case has yet expanded on the application of the DTSA to extraterritorial conduct. How courts will interpret the phrase "in furtherance of the offense" within a DTSA claim remains to be seen.

Whistleblower Immunity Trends

Another open question under the DTSA is whether and to what extent its whistleblower protections may extend to non-natural persons. Under the DTSA, whistleblower protection extends to any "individual" who discloses a trade secret made "in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and solely for the purpose of reporting or investigating a suspected violation of law."  18 U.S.C. § 1833(b)(1). For an employer to be eligible to recover exemplary damages and attorneys' fees under the statute, it must provide notice of the immunity provisions in any new agreement governing trade secrets or other confidential information. 18 U.S.C. § 1833(b)(3). Whether and to what extent this protection extends to non-natural persons has not yet been tested in the courts. And the ability of individual employees to seek immunity under the DTSA may be tested at the pleadings stage. See Unum Group, 2016 WL 7115967 at *2. (D. Mass. Dec. 6, 2016) (denying motion to dismiss on the basis of individual immunity because the defendant employee failed to plead sufficient facts establishing immunity).

Conclusion

Although the DTSA is still in its infancy, recent rulings have begun to flesh out the scope and application of the ex parte seizure process. Trends in filings indicate plaintiffs are rarely utilizing ex parte seizures, instead preferring to rely on TROs or requests for "expedited discovery."

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

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
Events from this Firm
17 Aug 2018, Other, Singapore, Singapore

Dentons Rodyk will be presenting to start-ups involved in the Rakuten Accelerator Programme in Singapore which is powered by Techstars, a start-up/seed accelerator, and will be covering:

  • The different classes of shares and rights attached to them in a venture capital context; and
  • The main elements of term sheets, investment agreements and shareholder agreements including key/common terms, market norms and deal-breakers and/or warning signs.
29 Aug 2018, Conference, Cape Town, South Africa

Dentons is proud to sponsor and present at Africa's most comprehensive event on audit, risk and governance.

29 Aug 2018, Other, San Jose, Costa Rica

Costa Rica will host the Cyberspace Camp® for the first time, a bootcamp that combines law and technology at the hands of ITechLaw.

 
In association with
Related Topics
 
Related Articles
 
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions