The U.S. Congress passed the Defend Trade Secrets Act of 2016 (DTSA) on April 27, 2016, providing for a federal cause of action for trade secrets theft. This DTSA expands intellectual property protection to address a growing concern of companies operating across state and national borders with highly valuable trade secrets. President Obama had strongly supported the bipartisan legislation and is expected to sign the bill into law in the next few days.
The legislation will amend the Economic Espionage Act to allow companies to sue in federal courts for trade secret misappropriation. Until now, federal law has only governed criminal enforcement and prosecution of this type of intellectual property. Private citizens and companies lacked a federal claim for trade secret theft and instead were left to navigate a mix of distinct state laws. The DTSA aims to harmonize trade secret proceedings and create a national standard through federal case law.
Notably, the new cause of action is “intended to coexist with, and not to pre-empt, influence, or modify applicable state law.” Federal courts will therefore act as another layer of protection against trade secret misappropriation. The legislation will also standardize key definitions for terms such as “trade secret” and “misappropriation” in accordance with the Uniform Trade Secrets Act.
The bill has broad support from both Capitol Hill and the business world. It passed in the House of Representatives by a vote of 410-2 and in the Senate by a vote of 87-0.
Implications for Asserting Trade Secrets
The DTSA adds a federal cause of action to intellectual property owners’ arsenals. As such, the DTSA may increase the volume of trade secret litigation, as it presents an opportunity to forego ineffective or inadequate state laws and increases the ease with which a litigant can elect to sue in federal court. Further, the DTSA includes provisions not available under state laws – such as authorization for the seizure of stolen trade secrets in “extraordinary circumstances.” Such seizures may limit the competitive harm faced and should now be assessed as part of a strategy for asserting trade secrets.
In addition, passage of the DTSA reflects the growing global recognition of the importance of trade secrets, as reflected in the trade secrets provisions of the Trans-Pacific Partnership Agreement, the Amendments to Japan’s Unfair Competition Prevention Act that took effect in January, 2016, and the adoption by the European Parliament of the Trade Secrets Directive earlier this month.