Employers are now armed with an avenue to pursue a federal civil suit for misappropriation of trade secrets. The Defend Trade Secrets Act of 2016 (“DTSA”) was enacted in May 2016 and creates a private civil cause of action for misappropriation of trade secrets. Misappropriation of trade secrets has been a federal crime for over twenty years under the Economic Espionage Act of 1996. However, prior to 2016, businesses were unable to pursue a civil suit in federal court when their trade secrets were stolen. Businesses’ sole remedy was to seek recovery under non-uniform state law, which has been viewed by many as inadequate due to the unpredictable and inconsistent application among states.
The DTSA creates a uniform standard for trade secret misappropriation. This allows companies and individuals to seek relief nationwide without having to account for the various differences found under state law. However, DTSA does not preempt any states’ laws relating to trade secrets, meaning parties may still pursue claims in state court. There is also a civil seizure provision of the DTSA, but only for “extraordinary circumstances,” and only when“necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.” There are, however, strict standards that must be met before a civil seizure is implemented and is only intended for emergency situations.
The DTSA also authorizes remedies consistent with the Uniform Trade Secrets Act, which has been adopted in most states, including Kansas. Those remedies include: (1) injunctive relief; (2) regular damages; (3) enhanced damages for willful and malicious appropriation; and most notably, (4) attorney fees. Injunctions sought under the DTSA may not prevent a person from entering into an employment relationship, nor can it conflict with state laws governing non-compete agreements. If restrictions are placed on an employee, those restrictions must derive from actual evidence of threatened misappropriation.
The DTSA provides an effective supplement to existing state law to protect an entity’s trade secrets. Companies will no longer be hampered by the lack of reach associated with state law in conducting discovery or serving defendants and witnesses. If you have questions concerning the DTSA or updating your employment agreements, we here at Joseph, Hollander & Craft are happy to assist in any way we can.