Robinson Brog Leinwand Greene Genovese & Gluck, P.C. - New York City Business Litigation Attorneys

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Federal Defend Trade Secrets Act Enacted - 5/19/16

by Felicia Ennis

On May 11, 2016, President Obama signed the Defend Trade Secrets Act (“DTSA”), which substantially amends the current Economic Espionage Act of 1996 (“EEA”), to create a private civil cause of action for trade secret misappropriation available to any injured party. A civil cause of action for trade secret misappropriation has previously been solely a matter of state law.  The DTSA amends the EEA to provide that: “An owner of a trade secret that is misappropriated may bring a civil action under this subsection if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” While the new cause of action is designed to create a uniform, federal standard for the protection of corporate trade secrets, it is not intended to preempt any state law trade secret causes of action that provide broader protection.

The DTSA authorizes a broad range of remedies, including injunctive and monetary relief. In “extraordinary circumstances,” a party bringing a civil action under the DTSA may seek an ex parte order providing for the seizure of property when it is needed to prevent the disclosure or further dissemination of a stolen trade secret.  An owner of a trade secret that is misappropriated may also seek (i)damages for actual loss caused by the misappropriation of the trade secret; or (ii)damages for any unjust enrichment caused by the misappropriation of the trade secret that is not addressed in computing damages for actual loss; or (iii)in lieu of damages measured by any other methods, the damages caused by the misappropriation measured by imposition of liability for a reasonable royalty for the misappropriator’s unauthorized disclosure or use of the trade secret.  If the trade secret is willfully and maliciously misappropriated, the DTSA authorizes an award of exemplary damages in an amount not more than 2 times the amount of monetary damages awarded.

WHAT DO EMPLOYERS NEED TO KNOW

The DTSA adopts the EEA’s broad definition of what qualifies as a trade secret, which includes almost every type of information so long as: (1) the information is actually secret; (2) the owner took reasonable measures to maintain that secrecy; and (3) independent economic value is derived from that secrecy.

The DTSA also offers a set of immunities and exceptions from liability for whistleblowers. Starting May 12, 2016 all employers will be required by Federal Law to provide a notice-of-immunity to “employees,” including all individuals performing work as a contractor or consultant, “in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” If an employer fails to comply with this notice requirement, the employer may not be awarded exemplary damages or attorney fees in an action against an employee to whom notice was not provided. The amendments made by the DTSA are effective as of their enactment date, May 11, 2016.  Employers should review existing contracts to determine whether updates are necessary, including compliance with the DTSA’s notice requirement.

This document has been provided for informational purposes only and is not intended to nor should it be construed to constitute neither legal advice nor the creation of an attorney-client relationship. Please consult your attorneys in connection with any fact-specific situation under federal law and the applicable state or local laws that may impose additional obligations on you and your company.