Employment, Labor & Benefits Update - May 2016

New Act, New Remedies: DTSA To Provide Additional Protection for Trade Secret Owners and Whistleblowers

By Nancy Sasamoto

With President Barack Obama expected to sign the Defend Trade Secrets Act ("DTSA") in the near future, the DTSA is about to become law. Under the DTSA, trade secrets owners will, for the first time, have the right to file suit in federal court for misappropriation of trade secrets, as well as pursue other new remedies. Currently, trade secrets protection is a matter of state law with all states, except New York and Massachusetts, having adopted some version of the Uniform Trade Secrets Act ("UTSA"). The DTSA will not preempt state law, but is intended to provide a unified legal framework to protect trade secrets from misappropriation by employees, as well as foreign actors.

While many of the provisions of the DTSA are identical to those under the UTSA, the Act includes several unique aspects. First, once the DTSA is enacted, an owner of a misappropriated trade secret will have the right to bring a civil action in federal court if the trade secret "is related to a product or service used in, or intended for use in, interstate or foreign commerce." Additionally, the trade secret owner will be able to apply for an ex parte seizure order that would allow the government to seize misappropriated trade secrets without giving any notice of the lawsuit to the defendant. Because seizure is an extraordinary remedy, certain stringent requirements are imposed on the party seeking the ex parte seizure order, including showing that immediate and irreparable injury will occur if the seizure is not ordered and that the harm to the applicant outweighs the legitimate interests of any party from whom the material is to be seized. The application for seizure must describe with reasonable particularity the matter to be seized and its location. Because of the drastic nature of this remedy, the applicant must post security and can be held liable for damages caused by a wrongful seizure.

In addition to the ex parte seizure order, the trade secret owner may be entitled to an injunction to prevent a person from entering into an employment relationship or to have conditions placed on such employment based on evidence of threatened misappropriation. Under the DTSA, damages for actual loss caused by the misappropriation or for any unjust enrichment may be recovered. In addition, a court can award exemplary damages in an amount not more than two times...