OBAMA SIGNS LAW ALLOWING TRADE SECRET OWNERS TO SUE IN FEDERAL COURT
DTSA DOES NOT PREEMPT STATE LAW
MISAPPROPRIATION OF TRADE SECRETS
The DTSA definitions of “trade secret” and “misappropriation” generally mirror those of the UTSA. The DTSA defines “trade secret” as all forms and types of information that (1) the owner thereof has taken reasonable measures to keep such information secret; and (2) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by another person who can obtain economic value from the disclosure or use of the information.4 The in-depth definition of the term “misappropriation” in the DTSA includes, in part, (1) “acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means,” or (2) “disclosure or use of a trade secret of another without express or implied consent by a person who … used improper means to acquire knowledge of the trade secret.”5 The DTSA states that the term “improper” includes “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means,” but excludes “reverse engineering, independent derivation, or any other lawful means of acquisition.”6
SEIZURE AS A REMEDY
Like most state trade secret law, remedies under DTSA include injunctive relief and monetary relief. However, seizure of property is a new remedy contemplated by the DTSA. A seizure request can be brought on an ex partebasis for the seizure of property necessary to prevent the dissemination of the trade secret that is the subject of the action.
A widely discussed and controversial provision of the DTSA, not present in state trade secret law, is whistleblower immunity and the consequential affirmative duties placed on employers. Specifically, the DTSA provides “immunity from liability for confidential disclosure of a trade secret to the government or in a court filing” if a disclosure of a trade secret disclosure is made “in confidence to a Federal, State, or local government official…or to an attorney; and…solely for the purpose of reporting or investigating a suspected violation of law,” or is made “in a complaint or other document filed in a lawsuit…if such filing is made under seal.”11 Additionally, an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding.12 However, the individual must file any document containing the trade secret under seal and otherwise cannot disclose the trade secret, except pursuant to court order.13
NO INEVITABLE DISCLOSURE DOCTRINE UNDER THE DTSA
The DTSA also protects former employees by restricting employers from preventing former employees from working at another company on the basis of the inevitable disclosure of trade secrets. Using the inevitable disclosure doctrine, employers in certain states can enjoin a former employee from taking a new job at another company that would inevitably result in the use of the company’s trade secrets. The DTSA does not allow for injunctive relief if doing so would “prevent a person from entering into an employment relationship,” thereby rejecting the inevitable disclosure doctrine.
Time will tell whether the DTSA brings conformity to trade secret litigation as the new act does not preclude circuit splits. That being said, the DTSA gives litigants more options in enforcing trade secrets at a juncture where many patent rights are being challenged at the U.S. Patent and Trademark Office. Whether to file a civil trade secret complaint in state or federal court will depend on a multitude of factors, such as the desired results of the plaintiff and whether the immunity provisions will apply. The broad definition of “employee” in the DTSA highlights the importance of non-disclosure agreements and the monitoring of relationships with contractors and vendors (both domestic and abroad) that may have access to confidential information. Moving forward, companies should review their policies and agreements to ensure that they are in compliance with the immunity provisions and have a proper notice in place.