08 / 19 / 2016

Defend Trade Secrets Act (DTSA): The Basics

trade_secrets-617468-edited.jpgOn May 11, 2016, President Obama signed into law the Defend Trade Secrets Act (DTSA). This law establishes a federal civil cause of action for misappropriation of trade secrets. Similar to the Lanham Act for trademarks, the DTSA provides an additional source of intellectual property protection

The push behind establishing the DTSA was to bring protections for trade secrets to the same level as protections given to patents, copyrights and trademarks through a more uniform body of federal law. Before this law’s enactment, civil trade secret laws belonged only to the States.

Misappropriation of trade secrets

The DTSA defines misappropriation as the improper acquisition or improper use/disclosure of trade secret information. The following are potential remedies under the DTSA:

  1. Injunctions for actual or threatened misappropriation.
  2. Monetary damages for actual loss and/or unjust enrichment.
  3. Punitive damages up to two times the amount of monetary damages (and reasonable attorney’s fees) for willful and malicious misappropriation.

The DTSA expressly does not apply retroactively. Its enactment on May 11, 2016 is its start date for application.  Ostensibly, this application is easy to apply. However, there have already been jurisdictional challenges in the country regarding parties who filed trade secret misappropriation claims before DTSA was enacted, but “allege that acts of misappropriation are ‘ongoing’ or ‘continuing."

Ongoing misappropriation

The challenging aspect is the fact that “misappropriation” is hardly a one-time event. In two exemplary cases, Bonamar Corp. v. Turkin and M.C. Dean, Inc. v. City of Miami Beach, Florida, the complainants allege the defendant(s) improperly acquired and subsequently used or disclosed a trade secret before the DTSA was enacted, but continue to use or disclose the trade secret post-DTSA enactment.

The DTSA is silent on whether it specifically applies to continuing acts of misappropriation of trade secrets that began before the DTSA was enacted, but states are not. This is where plaintiffs potentially have the freedom to stick with their State’s laws on trade secrets.

For example, Texas, which adopted the Texas Uniform Trade Secrets Act (TUTSA) in 2013, expressly states that continuing misappropriation that commenced before the enactment is not covered by TUTSA. Because the DTSA is so recent, federal litigation will likely iron out the Act’s wrinkles over time.

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