On May 11, 2016, the Defend Trade Secrets Act of 2016 was enacted, creating federal jurisdiction for a civil claim for trade secret misappropriation. The DTSA applies to the misappropriation of trade secrets for which “any act occurs on or after” May 11, 2016. The DTSA has a three-year statute of limitations, and for purposes of the limitations period, the act states that “a continuing misappropriation constitutes a single claim of misappropriation” (emphasis added).
One important area not specifically addressed by the language of the DTSA is whether the law applies to acts of continuing misappropriation that commenced prior to the DTSA’s enactment. For example, suppose an individual began misappropriating a former employer’s trade secrets in the years prior to the DTSA’s date of enactment, continuously until his departure sometime after May 11, 2016. Would a plaintiff’s claim alleging trade secret misappropriation under the DTSA be barred? The DTSA is silent on this specific point.
Since the drafters of DTSA purposely looked to the Uniform Trade Secrets Act, and intended to mirror protections afforded under existing state law, one can look to state trade secret misappropriation statutes for guidance, including the California Uniform Trade Secrets Act at California Civil Code § 3426 et seq. Unlike the DTSA, these statutes explicitly address whether acts of continuing misappropriation commencing prior to enactment are covered. The UTSA, when drafted, did not allow a plaintiff to “reach back” and sue for a continuing misappropriation that commenced prior to its effective date. It provides that “the [Act] also does not apply to the continuing misappropriation that occurs after the effective date.” CUTSA, on the other hand, does allow a plaintiff to partially “reach back.” While the part of the misappropriation occurring before CUTSA’s enactment would not be covered by CUTSA, the part occurring on or after the CUTSA enactment date would.
While the issue is one that the courts have yet to resolve, there is an argument that the DTSA’s silence means that the DTSA should be interpreted so that it does cover claims of continuing misappropriation commencing before the statute was enacted on May 11, 2016. This is especially true, given that trade secret statutes that came before the DTSA explicitly addressed the applicability to continuing misappropriation, while Congress chose to be silent and not include equivalent language in drafting the DTSA. Moreover, in a recent DTSA case, Henry Schein, Inc. v. Jennifer Cook, a court granted a motion for a preliminary injunction against a defendant based on alleged misappropriation that commenced on May 10, 2016 – prior to the DTSA’s enactment. Although the court did not explicitly address the issue of whether a plaintiff can “reach back,” that the court enjoined the defendant based on continuing acts that predate the DTSA serves as another strong indication that pre-DTSA continuing acts are covered.