Defend Trade Secrets Act of 2016: Signed into Law

On May 11, 2016, President Obama signed the Defend Trade Secrets Act (“DTSA”) into law. President Obama publicly supported this legislation and efforts generally directed to strengthen trade secret protections within the U.S. economy.

As we previously reported on May 3, 2016 and November 24, 2015, trade secret misappropriation was formerly treated exclusively as a matter of state law, governed by varied versions of the Uniform Trade Secrets Act as enacted in most states. A lack of uniform enactment of this Act resulted in differences in the application of the law between states, which presented difficulties for trade secret owners seeking to enforce their rights in the general commerce.

With the enactment of the DTSA, the application of trade secret misappropriation will allow for a uniform application of federal law. Under the DTSA, misappropriation of a trade secret that is related to a product or service used in, or intended for use in, interstate or foreign commerce will result in a private civil action in federal court. Many supporters of the DTSA have boasted that federal courts are better equipped than state courts to manage complex, multi-jurisdictional trade secret cases.

The DTSA will also provide parties comparable remedies to other violations of intellectual property rights, e.g., exemplary damages and attorneys’ fees in the event of willful and malicious misappropriation of a trade secret, injunctive relief (including available ex parte seizure orders) and compensatory damages. Notably, the provision allowing for courts to issue ex parte seizure orders is a remedy that was never available under state law. With concerns about abuse, the earliest iteration of the DTSA was amended to include the limiting language found in the final version, including an express proviso that an ex parte seizure order should only be used in “extraordinary circumstances.”

An interesting counterpoint to the White House’s support of the DTSA is its announcement of a related goal to reform the use of non-compete agreements in the workplace. In a report released shortly before the president signed the DTSA, the White House criticized what it characterized as a mis-use of non-compete agreements and the state laws that enforce such agreements as having a negative effect on U.S. innovation, entrepreneurship, and economic growth. We can speculate that the White House may believe the presence of a stronger federal trade secret law may encourage employers to more readily embrace future non-compete agreement reforms.

Gibbons P.C. will continue to monitor and report on the impact of the new federal trade secret law and non-compete agreement reforms.

Thomas J. Bean is a Director in the Gibbons Intellectual Property Department. This blog originally appeared on the Gibbons IP Law Alert on May 19, 2016.
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