President Barack Obama signed into law Wednesday, May 11th, a bill that will provide protection for trade secrets on the federal level.
This new legislation, called the Defend Trade Secrets Act of 2016, or DTSA, has been hailed by commentators as an extremely significant addition to federal intellectual property law. The DTSA was created as an amendment to the Economic Espionage Act of 1996 to provide civil remedies for trade secret violations under federal law. While some potential issues exist, I believe that this new law should be beneficial to many companies because of the possible increased trade secret protection and aggressive potential remedies that it will provide.
Trade secret protection in the U.S. has primarily been available under applicable state law. The Uniform Trade Secrets Act provides some consistency, and it has been adopted by 48 states. The trade secret laws of the various states are not totally uniform, however, and this has sometimes made it difficult for companies to protect their trade secrets under the various state laws. Legal actions involving trade secret protection have generally been brought in state courts. Since the DTSA is a federal law, more trade secret actions will now be able to be brought in federal court, providing an additional potential venue for these actions.
The DTSA does not replace or preempt existing state laws. As a result, this could be an advantage to companies as it may provide a separate method of protecting their trade secrets. The DTSA also defines trade secrets a little more broadly, using “public economic value” as the heart of the trade secret definition. This broader definition of what constitutes a trade secret may expand the range of information that a company can claim as a trade secret.
That said, there is a potential problem here: the DTSA does not provide a uniform system of trade secret law and instead establishes a federal level of trade secret law on top of the existing states’ trade secret laws. This could increase the number and the complexity of legal actions involving trade secrets. Therefore, a company that wishes to assert a trade secrets action will need to analyze which court — state or federal — will be more advantageous, and this will likely vary with the different circumstances of each situation.
The DTSA contains fairly aggressive potential remedies that may be advantageous to companies which believe that a trade secret violation has occurred. The provision that has drawn the most interest is the ability of a court to issue an ex parte seizure order in certain extraordinary circumstances.
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