Business and Legal Insights

On May 11, President Obama signed into law the Defend Trade Secrets Act of 2016, giving more options for individuals and corporations to take action when their trade secrets are stolen.

The DTSA, which went into effect immediately, borrows heavily from the language of the Uniform Trade Secrets Act (UTSA), variations of which have been adopted by 47 states, including Florida. Even so, the DTSA contains substantial changes impacting clients and attorneys.

New Federal Cause of Action

The major feature of the DTSA is the ability of an owner of a trade secret to bring a private, civil action against theft, “if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” (18 U.S.C. § 1836(b)(1).) Previously, the only recourse was to file a civil complaint under state law or seek federal criminal charges under the Economic Espionage Act of 1996.

As a result, victims of trade secret theft have in hand a powerful tool allowing them to retrieve their stolen information. If a victim can meet a rigorous eight criteria test through affidavit or verified complaint, a district court can issue an ex parte order to seize certain property necessary to prevent the propagation or dissemination of misappropriated trade secrets.

Balancing Act

Yet, the DTSA attempts to strike a balance between the victim and the person accused of trade secret theft. While a victim can take action to remove the trade secret from the target’s possession, they must post a bond sufficient to pay any damages in the case of wrongful or excessive seizure. In addition, the DTSA prohibits the victim from accessing the seized property until after the court hearing, which protects the target should any of the information belong to the target. If the seizure was sought in bad faith, the DTSA gives the target the ability to sue for damages, including punitive damages.

Victims that prevail under the new civil cause of action can obtain an injunction, monetary damages, and exemplary damages of not more than two times the actual damages awarded and attorney’s fees.

Implications for Employment Agreements

There is an important difference between the DTSA and Florida’s UTSA. The DTSA requires an employer to provide notice to employees of certain immunities to be eligible for an award of exemplary damages and attorney’s fees against an employee. An employee is broadly defined in the Act and the notice requirement applies to all contracts and agreements that are entered into or updated after May 11.

State Law Not Preempted

The DTSA does not preempt Florida’s UTSA, but allows parties to bring claims under the UTSA, the DTSA, or both. The ability to bring a DTSA action together with a UTSA could save claims for exemplary damages and attorney’s fees in a case where a plaintiff failed to provide the necessary employee notice under the DTSA.

Overall, the DTSA provides a new set of options for victims of trade secret theft, increasing the value of trade secrets and providing individuals and businesses with more options for protecting their intellectual property.

Relevant Resources:

• Defend Trade Secrets Act of 2016