An employer or trade secret owner can now assert a federal private cause of action for misappropriation of trade secrets under the Defend Trade Secrets Act (DTSA), 18 U.S.C. §1836(b), if “the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” As the DTSA reaches its first anniversary on May 11, here are a few key points:

Why Trade Secret Owners Should Consider Bringing a DTSA Claim

  • An action for misappropriation of trade secrets may be brought in federal court. Because the DTSA does not preempt state-law claims, litigants can still assert claims for violation of a state's trade secrets act, unfair competition, tortious interference, etc.
  • DTSA allows a district court to issue emergency ex parte seizure orders "in extraordinary circumstances" to immediately seize property to prevent a trade secret's dissemination where there is a finding that injunctive relief would be inadequate.
  • Something that may not qualify as a trade secret under state law may satisfy the definition under DTSA, because DTSA defines "trade secret" more broadly than the Uniform Trade Secrets Act (UTSA), which most state statutes are based.

What Employers Need to Do Under the DTSA

  • Any non-compete or confidentiality agreement with an employee, independent contractor or consultant entered into or renewed after May 11, 2016, must include a notice-of-immunity provision. That provision shall advise the employee that he/she will not be held criminally or civilly liable under any federal or state trade secrets law for disclosing a trade secret (a) to federal, state or local government officials, to their attorneys, or in a sealed court document, "solely" for the purpose of reporting or investigating a "suspected violation of the law," or (b) to their attorneys or in a sealed court document in connection with a lawsuit for retaliation by an employer for reporting a suspected violation of the law.
  • Employers can comply with the notice-of-immunity requirement if the agreement cross-references a policy document or employee handbook provided to the employee that contains the notice-of-immunity language.
  • Failure to include this provision will preclude the employer from recovering exemplary damages and attorneys' fees under DTSA.
  • Revise venue or forum-selection clauses to encompass any court with appropriate jurisdiction within the desired state. Do not limit venue clauses to state courts.