The Federal Defend Trade Secrets Act

By July 11, 2016Law
The Federal Defend Trade Secrets Act

In May 2016, the Defend Trade Secrets Act (the “DTSA”) created a new federal cause of action for trade secret misappropriation. The DTSA allows a plaintiff in a trade secret case to sue in federal court for civil claims that historically have been governed by state law. The DTSA does not preempt state trade secret law claims, so a plaintiff still may sue in state court under state law.

Employers should immediately update their employment agreements to provide a notice required by the Defend Trade Secrets Act. The DTSA includes a whistleblower provision that provides immunity for the disclosure of trade secrets to government officials for the purpose of reporting violations of the law. Under the DTSA, employers must provide a notice of whistleblower immunity “in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” If an employer does not provide this notice, the employer cannot recover punitive damages or attorneys’ fees that otherwise may be available under the DTSA.

One of the most publicized provisions of the DTSA is that it allows for ex parte orders that provide “for the seizure of property necessary to prevent the propagation or dissemination of the trade secret.” This remedy is not available under the Uniform Trade Secrets Act and could cause a significant disruption for the target of the seizure order. However, because the prerequisites for the issuance of a seizure order are long and detailed, this remedy may not be available frequently.

Owners of trade secrets should understand that the DTSA provides for a federal civil cause of action for trade secret misappropriation and that the DTSA allows for seizure orders. Employers should consider taking immediate action to update their employment agreements and policies to retain all potential benefits under the DTSA.

Bob Muraski is a business attorney based in Bellingham, Washington.