May 16, 2016

By: John R. Brumberg

On Wednesday, May 11, President Obama signed the Defend Trade Secrets Act (“DTSA”) into law. The DTSA revolutionizes trade secrets practice at the federal level. Its passage will likely multiply the number of trade secrets cases litigated in federal court.

We provide a few highlights:

• First, the DTSA allows the owners of trade secrets to bring a civil action for misappropriation in federal court. Thus federal jurisdiction—premised on federal law—now exists for trade secrets claims. Before the DTSA, trade secret misappropriation was mainly a matter of state law, as Pennsylvania had adopted its own version of the Uniform Trade Secrets Act.

The DTSA subjects claims to a three-year statute of limitations, while plaintiffs can secure punitive damages of up to two times the amount of actual damages in the event of willful and malicious misappropriation. Likewise, reasonable attorney’s fees are available for the prevailing party if the trade secret was willfully and maliciously misappropriated or if the claim of misappropriation was made in bad faith.

• Second, the DTSA provides the remedy of ex parte seizures. This allows a seizure to occur without advance notice to defendants and is the DTSA’s most controversial provision. Intended as a way to stop the dissemination of a trade secret, especially overseas, before its value has been lost through public disclosure, seizure is available only in extraordinary circumstances.
• Third, the DTSA gives immunity to whistleblowers who disclose trade secrets to the government or in a sealed court filing. Employers must now provide notice of the DTSA’s immunity to their employees in any employee contract that governs the use of a trade secret or other confidential information. Importantly, the DTSA bars employers that do not provide this notice from recovering the exemplary damages or attorney’s fees otherwise available under the Act.
• Fourth, the DTSA explicitly clarifies that “improper means” “does not include reverse engineering, independent derivation, or any other lawful means of acquisition.

For more information, please contact John R. Brumberg at JRB@Pietragallo.com.