Congress passed, and the President indicates he will sign, the Defend Trade Secrets Act of 2016 (“DTSA”) creating a federal cause of action for the misappropriation of trade secrets. Until now, misappropriation of trade secret claims have been litigated under state or common law theories of recover and usually in state courts unless the parties were diverse in their citizenship. The new law grants federal courts original, although not exclusive, jurisdiction to hear claims involving the misappropriation of trade secrets related to products or services used in, or intended for use in, interstate or foreign commerce.
The Act allows, in extraordinary circumstances, for the ex parte application and seizure of property necessary to prevent the propagation or dissemination of trade secrets covered by the law as well as reciprocal penalties against parties that wrongfully or excessively obtain ex parte seizures. The Act also provides damages to a party who has trade secrets misappropriated including actual damages, damages for unjust enrichment, reasonable royalties and punitive damages of up to two times the amount of economic damages as well as for the recovery of attorney’s fees and injunctive relief.
A person that discloses a trade secret in confidence to an Federal, State or local governmental official (directly or indirectly) or to an attorney solely for the purpose of reporting or investigating a suspected violation of law or is made in a complaint or other document filed in a lawsuit under seal, has immunity from criminal or civil liability not only under DTSA but also under state trade secret law. The DTSA otherwise does not preempt state law and its remedies are cumulative.
Employers using contracts or agreements governing employee use and disclosure of trade secrets or other confidential information are required to include disclosures outlining the immunity provisions of the Act. Failure to provide the required disclosures can preclude the employer from recovering exemplary damages or attorney’s fees against an employee who was not afforded the notice.
The new law provide new and unique tools as well as a federal forum for owners of trade secrets to enforce their rights in the event of trade secret misappropriation. A complete copy of the DTSA can be accessed here.
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