Bar News - June 15, 2016
Intellectual Property Law: Trade Secret Misappropriation Claims Move to Federal Court
By: Lisa N. Thompson
The Defend Trade Secrets Act of 2016 (DTSA) creates the first federal civil remedy for trade secret misappropriation.
With the increased globalization of our economy, the creation of a federal trade secret cause of action is more important than ever as US businesses try to remain competitive in the international marketplace. In addition to its strong bipartisan support, the DTSA was supported by a broad spectrum of US industries, including automobile, aviation, biotechnology, consumer goods, manufacturing, pharmaceuticals, and software companies.
Section 1832 of the Economic Espionage Act of 1996 (EEA) provided federal district courts with original jurisdiction over criminal trade secret cases brought by the Department of Justice, but the EEA did not provide a federal private right of action. Passage of the DTSA amends the EEA, and finally provides individuals and corporations a uniform federal law under which to pursue trade secret misappropriation claims.
Unlike other intellectual property rights, such as patents, copyrights, and trademarks, only trade secret rights have been enforced exclusively through state laws. Currently, civil trade secret misappropriation claims are governed exclusively by state law. Most states, including New Hampshire (See RSA 350-B), follow the Uniform Trade Secrets Act, but there are significant variations in the law among the states and how it is applied from state to state. As a result, a plaintiff who brings a trade secret suit in one state may face different evidentiary standards, discovery rules, and procedural requirements for pursuing a trade secret claim in another state.
It’s important to note that the DTSA would not preempt existing state laws regarding trade secrets, but by providing national uniformity in trade secret law, the DTSA should make it easier for individuals and corporations to seek relief for the misappropriation of their proprietary information.
The DTSA provides several provisions that improve on existing state laws. Most notably, under the DTSA, courts can now impose an ex parte civil seizure of property in “extraordinary circumstances” to prevent dissemination of trade secrets. This seizure provision requires that the assets to be seized must be in “actual” possession of the person misappropriating or stealing the trade secret, for example a USB flash drive or computer hard drive. The ability to obtain an ex parte seizure order affords businesses an important and powerful tool in the fight against trade secret theft that currently does not exist under state law.
Another notable provision of the DTSA is that it provides an immunity provision which is intended to protect an individual from civil or criminal liability for the disclosure of a trade secret made in confidence to a government official or attorney for the purpose of reporting a violation of law.
The DTSA specifies that its scope is limited to preventing “actual or threatened misappropriation” of a trade secret. Exemplary damages of two times the amount of damages and attorneys’ fees can be awarded in cases where there is proof that the misappropriation was “willful and malicious.” The DTSA also protects those being sued under the DTSA by providing for an award of attorneys’ fees where there is a showing of “bad faith” in bringing the claim.
Any information that is unique to a particular company but is not public knowledge can be considered a trade secret. However, a company can only pursue a trade secret claim if it can demonstrate that it has untaken reasonable measures to protect its confidential information and trade secrets.
Employers should evaluate their policies and take measures to ensure that comprehensive procedures are in place for the protection of trade secrets and other confidential information and in compliance with the DTSA.
Lisa N. Thompson, is an attorney with Hage Hodes in Manchester. Her practice focuses primarily on business law and intellectual property matters, including trademarks, copyrights, trade secrets, and Internet matters. She can be reached by email.