New Federal Private Right of Action for Trade Secret Misappropriation?

Trade secrets are often a company’s most valuable asset. Historically, companies seeking to protect their trade secrets in court have needed to rely on a combination of state law remedies, including various versions of the Uniform Trade Secrets Act (“U_1061885TSA”), as well as common law and local statutory remedies. The UTSA has been passed in some form and adopted in 48 states as well as the District of Columbia, Puerto Rico and the U.S. Virgin Islands — not in Massachusetts and New York.

The Economic Espionage Act of 1996 (“EEA”) is a federal law that prohibits trade secret misappropriation, but it only provides criminal penalties. In practical terms, this means the only way to seek relief under the EEA is to convince federal prosecutors to pursue your case on behalf of the government, which is no easy task. Currently, there is no federal private right of action for trade secret misappropriation.

All of that may change soon, as a bi-partisan group of legislators in Congress introduced the Defend Trade Secrets Act of 2015 (“DTSA”) on July 29, 2015. The bill is sponsored by Senators Orrin Hatch (R-UT), Chris Coons (D-DE), Jeff Flake (R-AZ), Dick Durbin (D-IL), Thom Tillis (R-NC), Tammy Baldwin (D-WI), and U.S. Representatives Doug Collins (R-GA) and Jerrold Nadler (D-NY). It is also backed by a wide variety of trade associations, chambers of commerce, and corporations. Versions of this proposed law have been introduced in prior years, without success.

If passed, the proposed DTSA will create a private right of action for misappropriation of trade secrets under federal law. This means that companies will have the power to sue alleged misappropriators without regard to whether federal prosecutors wish to pursue charges. The current version of the bill contains many similarities to the UTSA, including a similar definition of “misappropriation,” similar injunctive relief and monetary damages, and the recovery of attorneys’ fees in cases involving more egregious violations. One significant change to this year’s bill is that it toned down the controversial ex parte seizure provision from last year’s bill, which would allow a private party to take aggressive steps to secure the return of trade secrets immediately and without even giving notice of the lawsuit. The current bill adds more procedural safeguards than contained in last year’s bill, to better ensure that an ex parte seizure is only permitted in the most flagrant situations.

Proponents of the DTSA argue that having a uniform standard for trade secret misappropriation claims across the United States, one with more teeth than the state counterparts, would be beneficial. Critics complain that there is already sufficient (though not complete) uniformity in trade secret law, and adding another layer is unnecessary. Critics also fear that the ex parte seizure provision could be abused by overzealous plaintiffs. One thing is clear — there appears to be momentum in Congress to pass some form of this bill in this legislative session.

Stay tuned to this blog for future developments.

This entry was posted in Defend Trade Secrets Act 2015, Economic Espionage Act, Law Reform, Trade Secret, Uniform Trade Secrets Act. Bookmark the permalink.

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