The Defend Trade Secrets Act of 2016 (DTSA) is a United States federal law that allows an owner of a trade secret to sue in federal court when its trade secrets have been stolen.[1] The act was signed into law on May 11, 2016.
Among other things,
A trade secret owner may file a civil action in a U.S. district court seeking relief for trade secret misappropriation related to a product or service in interstate or foreign commerce. The bill establishes remedies including injunctive relief, compensatory damages, and attorney's fees. It sets a three-year statute of limitation from the date of discovery of the misappropriation.
A trade secret owner may apply for and a court may grant, in extraordinary circumstances, an ex parte seizure order to prevent dissemination of a trade secret if the court makes specific findings, including that: (1) a temporary restraining order or another form of equitable relief is inadequate, (2) an immediate and irreparable injury will occur if seizure is not ordered, and (3) the person against whom seizure would be ordered has actual possession of the trade secret and any property to be seized.
A court must take custody of and secure seized materials and hold a seizure hearing within seven days. An interested party may file a motion to encrypt seized material.
A party harmed by a wrongful or excessive seizure may move to dissolve or modify the order and may also seek relief against the applicant of the seizure order.
(Sec. 3) The bill increases the maximum penalty for trade secret theft (currently $5 million) to the greater of $5 million or three times the value of the stolen trade secret.
A court may not authorize or require the disclosure of information that an owner asserts to be a trade secret unless the court allows the owner to submit under seal a description of the interest in keeping the information confidential. Additionally, disclosure of information related to a trade secret in connection with a prosecution does not constitute a waiver of trade secret protection unless an owner expressly consents to such waiver.
It adds economic espionage and trade secret theft to the list of predicate offenses that constitute racketeering activity.
The DTSA protects whistle blowers who disclose trade secrets to a government official or an attorney while reporting a suspected violation of law. The DTSA states that “any contract or agreement[1]with an employee[2] that governs the use of a trade secret or other confidential information” must notify the employee of the immunity provided by the Act. If the contract or agreement fails to do so, the employer waives its right to recover the attorneys’ fees and exemplary damages available under the DTSA. Notice of the immunity provision must be added “to contracts and agreements that are entered into or updated after the date of enactment of [the DTSA],” which was May 11, 2016. An example of the type of notice language that could be utilized:
Pursuant to the Defend Trade Secrets Act of 2016, the undersigned agrees that an individual may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (a) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
The undersigned further agrees that a person who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the person (a) files any document containing the trade secret under seal, and (b) does not disclose the trade secret, except pursuant to court order.
The Act defines “employee” to include “any individual performing work as a contractor or consultant for an employer.”