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Federal trade secret law creates new rights and remedies while tracking Uniform Trade Secrets Act

May 19, 2016

The Defend Trade Secrets Act of 2016 (DTSA) became effective on May 12, 2016. The DTSA amends the Economic Espionage Act of 1996, which previously was only a criminal law, to create a civil cause of action in federal court for trade secret owners. Trade secrets used or intended for use in interstate or foreign commerce are protected by the DTSA.

The DTSA uses the same definitions found in the Uniform Trade Secrets Act which has been adopted with some variations in most states. The DTSA does not replace state law but provides additional rights. For example, a trade secret owner may request an ex parte (without notice) seizure of its trade secrets that have been misappropriated. This is an extraordinary but limited remedy that will likely apply in a small minority of cases.

The DTSA damage remedies include the right to recover the money that a defendant would have spent to research and develop the trade secret on its own. In cases of willful and malicious misappropriation, the Court may award double the amount of actual damages and unjust enrichment as exemplary damages, and may award attorney fees.

Employers who have trade secret confidentiality agreements with employees and contractors must give written notice of DTSA whistleblower protections or the employer will not be able to recover exemplary damages or attorney fees. A whistleblower is permitted to make very limited disclosure of trade secrets to report suspected legal violations. The whistleblower notice provisions are particularly important because statistics show that 90 percent of trade secret misappropriation claims involve employees or business partners of trade secret owners.

If you have questions about the DTSA, appropriate language to comply with the whistleblower protection notice provisions, or about trade secret best practices or audits, please contact a member of Honigman’s IP Department listed on this alert.