On May 11, 2016 – after years of bipartisan negotiation resulting in widespread support from both sides of the political aisle, as well as from the business community – President Obama signed the Defend Trade Secrets Act of 2016 (DTSA), the long-proposed legislation that establishes a federal trade secrets law.
Before the DTSA, companies seeking civil remedies for misappropriation of their trade secrets were generally limited to state law enforcement. Although 48 states have adopted the Uniform Trade Secrets Act (UTSA) in some form, there are significant differences among the states in the application of the UTSA. Moreover, companies were usually limited to litigating in state court, except in cases where federal diversity jurisdiction exists. Some jurisdictions, but not others, had allow federal courts to hear trade secret claims along with claims under the federal Computer Fraud and Abuse Act where employees exceeded their authorization to access trade secret materials from their company computers. In short, there was no consistent nationwide scheme for enforcement of trade secret protection.
The DTSA amends the federal Economic Espionage Act of 1996 to create, for the first time, a federal civil remedy for the misappropriation of trade secrets.
The bill will create a civil cause of action in federal court for trade secret misappropriation and provide remedies that are not available in state court trade secret actions.
Like patents, trademarks, and copyrights, trade secret owners may seek redress for intellectual property theft based on a federal statutory right in federal court should the bill become law. Additionally, the bill provides for the availability of orders that will allow trade secret owners to have law enforcement seize stolen trade secrets without notice to the misappropriator upon a sufficient showing to the federal court.
Senate bill, have indicated that the bill will harmonize federal law and give businesses more consistent legal protections when their trade secrets are stolen.
Though an employer may be eager to bring a trade secret claim against former employees as soon as possible, filing suit before properly vetting the claim can lead to serious consequences: a malicious prosecution case against the lawyers who signed the pleadings.
A law firm is fighting such allegations in California after losing at bench trial on behalf of FLIR Systems, Inc. and Indigo Systems Corporation (collectively, “FLIR”), who brought suit against a group of former employees attempting to launch a competing business. Though the California Court of Appeal for the Second District affirmed a lower court’s ruling that the employee’s malicious prosecution suit could not proceed, Parrish v. Latham & Watkins, 238 Cal.App.4th 81 (2015), the California Supreme Court recently announced it will reconsider that decision.
Social media is everywhere nowadays. The line between professional and personal with these accounts is growing more and more blurred. As such, lines designed to protect employee privacy are intersecting with trade secret protection in conflicting ways.
Joining LXBN TV to explain is Seyfarth Shaw attorney Eric Barton—author on the firm’s blog, Trading Secrets.
There’s no doubt that protection of trade secrets is a major concern for most businesses operating in today’s global economy. As we have previously discussed, a few years ago CREATe.org and PwC US released a report that highlighted how far-reaching and deeply challenging trade secret theft is for companies operating on a global scale. Notably, in their report, CREATe.org and PwC estimated that trade secrets theft costs anywhere between 1-3% of the GDP of the United States and other industrial economies.
To address the threat to the trade secrets of US businesses, earlier this year Senators Orrin Hatch (R-UT) and Christopher Coons (D-DE) introduced the “Defend Trade Secrets Act of 2015” (S. 1890) in the United States Senate, while Rep. Doug Collins (R-GA) introduced an identical version of the same bill (H.R. 3326) in the United States House of Representatives. As we discussed here, if enacted, the Defend Trade Secrets Act would provide a civil cause of action in federal court to private litigants for “misappropriation of a trade secret that is related to a product or service used in, or intended for use in, interstate or foreign commerce.” In addition, the bill seeks to (1) create a uniform standard for trade secret misappropriation by expanding the Economic Espionage Act; (2) provide parties pathways to injunctive relief and monetary damages to preserve evidence, prevent disclosure, and account for economic harm to companies; and (3) create remedies for trade secret misappropriation similar to those in place for other forms of intellectual property.