Yesterday President Obama signed the Defend Trade Secrets Act (“DTSA”) into law, creating the first federal private right of action for misappropriation of trade secrets. Its passage marks a significant step toward the creation of a federal system of trade secrets law and the most significant expansion of federal intellectual property law in 70 years.
Historically, federal intellectual property law has covered copyrights, patents, and trademarks. Trade secrets, however, have been protected only at the state level under a particular state’s adoption of the Uniform Trade Secrets Act (“UTSA”), which has resulted in state-to-state differences in application of the law. While the DTSA aims to create a more predictable body of trade secrets case law, the Act will co-exist with the current state laws.
The DTSA, which amends and extends the Economic Espionage Act to the civil arena, adopts a definition of “misappropriation” that is nearly identical to that under the UTSA, but differs in several other important ways. Aside from creating a federal right of action, the law permits injunctive relief for any misappropriation, provides for compensatory damages resulting from either the actual loss of the trade secret or from another party’s unjust enrichment, and creates a controversial ex parte seizure provision permitting courts to preemptively stop possible dissemination of a trade secret before the case is completed. The final version of the law, however, includes language limiting a court’s ability to utilize this power only in “extraordinary circumstances,” and a procedure allowing targets of these orders to seek damages when the power is wrongfully used.
Notably for employers, the DTSA imposes two important limitations on actions against former employees—one prohibiting injunctions that prevent employee mobility in the absence of evidence of threatened misappropriation and a second immunizing whistleblowers for confidential disclosure of a trade secret to the government or in court filings.
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