Legal Alert: DTSA Expands Protection to Trade Secret Owners

Mark E. Musekamp

On May 11, 2016, President Obama signed the Defend Trade Secrets Act (DTSA), which had overwhelmingly passed in both the United States House of Representatives and Senate in April. According to some commentators, the enactment of this law will mark one of the most significant expansions of federal intellectual property law since the passage of the Lanham Act. Although there had previously been federal criminal penalties for the theft of trade secrets, the DTSA would, for the first time, allow holders of trade secrets to seek civil remedies directly in federal court.

Prior to the enactment of the DTSA, trade secrets had been primarily governed by state law. Although 48 states had adopted some form of the Uniform Trade Secrets Act, each state had adopted its own version of this law, which led to inconsistent interpretations and enforcement of this law. One of the primary reasons for enacting the DTSA was to create uniformity in the interpretation and enforcement of trade secret law across the 50 states.

Although the DTSA will not preempt state law, there are several features of the DTSA, which trade secret holders will find preferable to its state-law counter parts. For example, in order to correct some of the perceived procedural weaknesses of state law, the DTSA would authorize ex parte seizures of property containing misappropriated trade secrets. Under extraordinary circumstances, a trade secret owner may petition a court to seize property provided that the owner can clearly show a number of statutory elements including 1) the inadequacy of other equitable remedies, 2) an immediate and irreparable injury would occur if a seizure were not ordered, and 3) the harm to the trade secret owner outweighs the harm to the party against whom the seizure is ordered. Although these statutory hurdles may appear burdensome, in instances of egregious misappropriation, trade secret owners may find this a useful mechanism to prevent further harm.

In addition, trade secret holders may have other remedies including injunctive relief and monetary damages for actual loss, unjust enrichment and/or reasonable royalties for use or disclosure of trade secrets. In instances where the misappropriation is found to be willful and malicious, a court may award 1) exemplary damages by multiplying the monetary damages by no more than two and/or 2) reasonable attorneys fees.

One of the most intriguing aspects of the DTSA is its lack of express territory-based limitations. As a result, the question of whether domestic companies may pursue foreign entities for trade secret theft that occurs outside of the United States remains open. However, it is clear from other portions of the bill that Congress’ concerns for trade secret theft are not merely domestic. In particular, Congress has requested that the Department of Justice prepare a report on the extent of trade secret theft occurring abroad. Whether the current form of the DTSA is meant to curtail trade secret theft occurring outside of the United States or more legislation is forthcoming is subject to debate and further judicial interpretation.

Should you have any questions or need assistance, please contact us.

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KMK Legal Alerts are intended to bring attention to developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.


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