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The Defend Trade Secrets Act of 2016

Patterson, P.C.

May 23, 2016 (Houston) – Just this month the President signed into law new federal jurisdiction for misappropriation of trade secrets. The Defend Trade Secrets Act (“DTSA) of 2016 became law on May 11, 2016 after being unanimously passed in the Senate and ratified in the House by a vote of 410-2. The DTSA became effective immediately for any trade secret misappropriation after May 11, 2016.

The DTSA considerably mirrors existing state law under the Uniform Trade Secrets Act, already adopted by 48 states. The DTSA, like state laws, has similar definition of trade secrets, similar remedies, and a three year statute of limitations. However, the DTSA created a new ex parte seizure procedure where a defendant “would destroy, move, hide, or otherwise make such matter inaccessible to the court, if the applicant were to proceed on notice to such person….” A party may seek an order for an immediate seizure, but the court ordering same must also set a hearing not less than seven days after the issuance of the order. Finally, the law protects whistleblowers from retaliatory accusations of trade secret misappropriation, so long as the whistleblowers disclose trade secret information to government or court officials in confidence.

The DTSA does not preempt existing state law. This allows a plaintiff the option whether to file in a federal or state court. Significantly, the DTSA also prohibits injunctive relief based on the inevitable disclosure doctrine, which is consistent with California law and thus should not detrimentally impact employee mobility.

The DTSA may affect your company related to:

  1. The disclosure of the whistleblower immunity provisions in the DTSA in any non-compete or employment agreements.
  2. Evaluating the potential prosecution or defense of a misappropriation of trade secret claim in State vs. Federal court.
  3. The potential of any immediate seizure rights and how they may be used for or against your company, employees, and proprietary information.

The DTSA allegedly brings uniformity to trade secret misappropriation suits with full access to the federal courts for trade secret litigants which may affect both plaintiffs and defendants.