On May 11, 2016, President Obama passed into law the Defend Trade Secrets Act (“DTSA”) after a successful bipartisan effort to pass the bill through the House and the Senate, previously reported by Dykema HERE. Effective immediately, the new federal law permits courts to grant injunctive relief, statutory and punitive damages, and in extraordinary circumstances, civil seizure of misappropriated trade secrets.
Although viewed as an opportunity to bring uniformity to an existing patchwork of state trade secret laws, the DTSA does not preempt existing state laws, 48 of which have adopted some variation of the Uniform Trade Secrets Act (“UTSA”). Therefore, companies should be prepared to assert and defend both state and federal laws from this date onward.
It also remains to be seen to what extent business will take advantage of this new federal law. On the one hand, the DTSA will permit additional common law misappropriation claims to be brought alongside it in federal court, which are typically preempted in state court actions by the UTSA. However, without a clear body of case law, it is unclear either how frequently or uniformly federal courts will grant the available types of relief pursuant to the DTSA (and to what extent). This is especially true of the ex parte seizure procedure outlined in the DTSA, which will likely only apply in the most extreme of circumstances.
It is also unclear how the DTSA will work in connection with non-compete agreements and non-solicitation clauses of employment contracts. The DTSA allows parties to enjoin former employees from entering into new employment based upon evidence of “threatened misappropriation.” However, the DTSA also states such relief cannot be granted when it is based simply on an employee’s knowledge of trade secret information. What will amount to threatened misappropriation and what is simply an employee’s working knowledge of trade secrets will be questions for the courts to decide.
Although likely one more arrow in the quiver of businesses, further guidance on the DTSA is still needed from the court before the extent of this new federal reform is fully understood.