As previously reported on TSW, the road to federal right of action for trade secrets misappropriation has been a long one. In the absence of a federal trade secrets law, the Economic Espionage Act (“EEA”) and various state versions of the Uniform Trade Secret Act (“UTSA”) have filled the gap with an uneven patchwork of legislation and no civil remedies at the federal level. This might soon change. On January 27, 2016 the U.S. Senate Committee on the Judiciary passed the Defend Trade Secrets Act of 2016 (“DTSA”), sponsored by Sens. Orrin Hatch, R-Utah, and Chris Coons, D-Del. The legislation was also backed by a deep pool of companies ranging from Silicon Valley startups to corporate giants concerned about the hundreds of billions of dollars reportedly lost annually as a result of trade secret theft.

While Committee hearings on the DTSA in December, 2015 exposed concerns about the bill, new amendments, including the following, assuaged detractors:

  • With respect to ex parte civil seizure, the remedy is now available “only in extraordinary circumstances;”
  • Restrictions on employee mobility are lessened and any injunction must “be based upon evidence of threatened misappropriation and not merely on the information a person knows;”
  • Federal preemption is more clearly limited and an injunction cannot “otherwise conflict with an applicable State law prohibiting restraints on the practice of a lawful profession, trade, or business;”
  • Exemplary damages are limited to double rather than treble damages;
  • The Statute of limitations is expanded from three to five years; and
  • New whistleblower protections safeguard individuals who have disclosed trade secrets to the government or in the context of retaliation lawsuits.

The bill as amended received unanimous approval and now moves on to floor debate. It has been a long, hard road but with the passage of the DTSA in the Senate Judiciary Committee, a right of federal action under for trade secret misappropriation may finally be in sight.