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Proposed Legislation Would Provide a Federal Civil Claim for Trade Secrets Misappropriation
Friday, August 7, 2015

American companies soon will have a powerful new tool to combat the taking and unauthorized use of their confidential business information. The Defend Trade Secrets Act of 2015, S. 1890 (DTSA) was introduced on Wednesday, July 29, 2015, with support from both political parties, both houses of Congress, and many companies and business organizations across the country. After several previously introduced bills have withered on the vine, hopes are high that the broad base of support for this bill will carry it through passage.

If passed, the DTSA will provide the first federal civil cause of action. State statutes and common law have long provided relief for trade secrets misappropriation, and a federal criminal statute – the Economic Espionage Act, 18 U.S.C. §1831, et seq., (EEA) – has been on the books since 1996. But there has been no federal civil statute for trade secrets theft.

The DTSA is similar to and connected with other statutory provisions. It is an amendment to the federal EEA and borrows much of its definitional scheme from the multi-state Uniform Trade Secrets Act. Nonetheless, its passage will bring dramatic change to trade secret protection law in several ways.

First, the DTSA will provide a path to federal court for aggrieved trade secrets owners, provided they can show that the trade secret is related to a product or service to be used in interstate commerce. And plaintiffs utilizing the new legislation will be able to sidestep the current patchwork of state laws – both statutory and common law – that currently provide civil trade secret claims and remedies. A unified federal civil statutory scheme should help equalize the nature and extent of relief available from state to state.

Second, the DTSA will provide powerful new remedies for trade secret misappropriation. In addition to the remedies currently available under state law (including damages and injunctive relief), plaintiffs will be able to seek, for example,ex parte seizure orders. Seizure provisions sparked dissention regarding two similar legislative initiatives last year, with critics expressing concern about abuse. The DTSA’s seizure provisions are more limited, however, reserving that remedy for the most clear-cut and extreme cases and providing various safeguards in connection with the issuance of seizure orders. The proposed statute’s punitive damage provision, which allows up to three times the amount of a compensatory damage award, is consistent with other punitive damages rules and is likely to be less controversial.

Procedurally, the DTSA will smooth the way for trade secrets plaintiffs, making it easier for plaintiffs to conduct discovery, and enforce subpoenas and judgments, across state lines. Finally, the DTSA will have a longer “look back,” as the statute of limitations (the time limit) for claims brought under the DTSA will be five years – longer than for most state statutory claims.

Calls for these changes have been loud and sustained, and the DTSA’s provisions are the result of several years of legislative wrangling over previous amendment attempts. Passage of the DTSA therefore is expected soon after Congress reconvenes this fall.

[1] Some version of the Uniform Trade Secrets Act has been adopted in every state except New York.

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