Defend Trade Secrets Act and How it May Affect Your Business

Enacted in May 2016, the Defend Trade Secrets Act (DTSA) amends the Economic Espionage Act of 1196 (EEA) and provides for a federal private right of action; exemplary damages and attorney fees; early ex-parte seizure of the trade secret by a court; and, protections in harmony with the new digital era.

So what does this mean for your business and your trade secrets?

Protecting Your Trade Secrets

Trade secrets are valuable IP assets and can create significant revenue opportunities for companies. Their importance in today’s global economy is growing in an age of digitalization and data sharing. Prior to the enactment of the DTSA, private parties could not assert a federal civil cause of action alleging misappropriation of trade secrets; rather, those claims were governed by state law and – absent a basis for federal court jurisdiction – litigated in state courts. Now, the doors to the federal court are open if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce. Moreover, the DTSA changed the definition of a trade secret to wording more in harmony with the language as that term is defined in serval states’ versions of the Uniform Trade Secrets Act. However, the DTSA does preempt state laws. Accordingly, the trade secret owners may bring claims in state as well as federal court. This may be advantageous – for example, if the scope of trade secrets protectable are broader under the laws of your state.

Remedies to this Act

Remedies under the DTSA include injunctive relief; damages awarded based upon actual loss, unjust enrichment or a reasonable royalty; double damages for willful and malicious misappropriation; property seizure; and, under certain conditions, attorney’s fees may be awarded. Moreover, the DTSA provides a new weapon for trade secret owners: Ex Parte seizure of the trade secret that allows a court, in “extraordinary circumstances”, to issue an order commanding the trade secret into the custody of the court.

Also, there are Whistle-blower Protections under the DTSA that, in essence, allow employers to sue employees in federal court for pilfering confidential information and/or trade secrets, and allows attorney fees to be shifted to the offending employee if the employee loses the lawsuit; but, only if the required advisement is used.  That advisement- which requires employers to provide notice of an employee’s potential immunity for whistleblowing- should be contained in the Confidential Information section of a non-compete & non-disclosure agreement, or non-disclosure agreement, or in the employee handbook depending on how the employer elects to advise employees of the confidential information policy.

According to the ABA Section for Litigation Members, over 60 federal actions have been filed with DTSA claims. These have included cases such as a breach of contract and common law unfair competition as a violation of the Uniform Trade Secrets Act. The Whistle-blower provisions of the DTSA may cause your company to determine whether its current NDA’s, non-compete, employment agreements and employee handbooks need to be updated. To learn how to remain legally compliant under the Defend Trade Secrets Act or how you can protect your business’s trade secrets, call a Sioux Falls attorney, Omaha lawyer, or Sioux City attorney today!