Important Information about the Defend Trade Secrets Act

What is the Defend Trade Secrets Act?

When President Obama signed the Defend Trade Secrets Act (DTSA) last month, he provided business owners with another tool to protect the confidential information that gives them an economic advantage over their competitors. There is now a new cause of action in federal court designed to prevent and/or punish the misappropriation of trade secrets. Significantly, the DTSA does not preempt state laws regarding these matters, so employers and owners can now bring legal actions under both DTSA and state laws. It is always wise to engage the services of an experienced, well-reputed employment and copyright law attorney when dealing with such issues and disputes since they can be crucial to the success, or even the survival, of your business.

Under what circumstances does the DTSA apply?

As long the trade secret misappropriated is “related to a product or service used in, or intended for use in, interstate or foreign commerce,” the owner of that trade secret is permitted to bring a civil action in federal court.

Are exceptions ever made?

Yes. Exceptions are made for individuals who disclose trade secrets confidentially to federal, state, or local officials, or to an attorney to report a suspected violation of the law. Exceptions are also made for those filing lawsuits alleging employer retaliation.

What is the definition of a trade secret under the DTSA?

Trade secrets are broadly defined under the new Act to include “all forms and types of financial, business, scientific, technical, economic, or engineering information,” as long as the information has independent economic value because the owner has taken measures to keep it secret.

What steps can the federal court take to prevent misappropriation of a trade secret under the DTSA?

Under the DTSA, a federal court can:

  • Grant an injunction to prevent misappropriation of a trade secret
  • Award damages for misappropriation
  • Award “exemplary damages” if the misappropriation is willful and malicious
  • Award attorneys’ fees if the misappropriation was “willful or made in bad faith”

It should be noted that if exemplary damages are awarded they are limited to twice amount of the award damages.

When is seizing of property permitted under the DTSA?

In cases where it is necessary to prevent the circulation of trade secrets, the DTSA allows the court to immediately seize property of the offending party. Such a seizure order can be issued ex parte, meaning that the offending party does not get a chance to respond. The owner seeking such an ex parte order of seizure, however, has to meet strict requirements. He or she must demonstrate that the other person or company not only misappropriated the trade secret but either used, or conspired to use, improper means to misappropriate it. 

If issues surrounding trade secrets arise in your business, it is crucial that you consult with a highly skilled trade secrets attorney who has the know-how to protect you and company from financial and legal complications.