Federal Trade Secret Protection: What is the Defend Trade Secrets Act and How Does it Affect You?
In 2016, the Defend Trade Secrets Act (the “DTSA”) was signed into law. The DTSA was widely considered as the biggest development in intellectual property law in half a decade, with far reaching implications for how people and businesses protect their trade secrets. So, what is the DTSA? This article will provide a basic layout of the DTSA’s most important provisions and how they can affect you.
Federal right of action
Before the DTSA became law, lawsuits involving misuse or misappropriation of trade secrets were generally brought in state court. Although these suits could make their way to federal court under certain circumstances, the majority of cases were disputed and resolved in state court. This could create some confusing problems, since each state’s laws on trade secret protection vary, from the statute of limitations down to the definition of what is and what is not a trade secret.
The DTSA resolves that issue by granting trade secret holders a federal right of action, meaning that those whose trade secrets are misused or misappropriated may now sue directly in federal court, rather than having to navigate the potentially confusing state court systems. The DTSA does not preempt state law, however, meaning that a lawsuit in state court is still an option for trade secret owners. In this way, the DTSA provides trade secret owners more options when it comes to protecting their intellectual property rights.
The DTSA provides its own broad definition of what constitutes a trade secret. By using such a broad definition, the protections of the DTSA are granted to a wide variety of proprietary information. The text of the DTSA defines a trade secret as follows: “all forms and types of financial, business, scientific, technical, economic or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if (A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information 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.” Although the text of the law is full of legal jargon and may seem more confusing than clarifying, having one definition of what is a trade secret allows for more certainty regarding what is and is not protected as proprietary information.
The DTSA also defines what constitutes misappropriation of a trade secret. In essence, the DTSA labels as misappropriation any use or disclosure of a trade secret when the person using or disclosing the trade secret knows or should know that the trade secret in question was acquired improperly or was acquired under a duty to keep the trade secret confidential. By clarifying what constitutes misappropriation as well what qualifies for the protections of a trade secret, the DTSA provides trade secret owners with more certainty regarding when they may have a claim to enforce their intellectual property rights.
Under the DTSA, a new remedy is also available to trade secret owners: civil seizure. This controversial measure adds another level of protection for trade secret owners and is designed to mitigate the damages caused when a trade secret is misappropriated.
Civil seizure allows trade secret owners, when a trade secret has been misappropriated, to apply to the court for an order which allows for “seizure of property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.” This means that a trade secret owner may have the ability to immediately protect a misappropriated trade secret.
This does not mean that civil seizure will be an option in all trade secret disputes, however. Civil seizure is an extraordinary remedy, and as such is only to be granted by the courts in exceptional circumstances. A court will only grant an order for civil seizure if the trade secret owner can show that immediate and irreversible damages will result without the order. The court will also consider the potential impact of a civil seizure on the defending party, as well as a variety of different factors.
Despite the limited availability of the civil seizure remedy, under the right circumstances it can provide quick and effective protection for intellectual property of an individual or business. When waiting for a court case to end will take too long to provide the relief needed, the DTSA allows trade secret owners to act quickly via civil seizure to guarantee their intellectual property is not used or disseminated improperly.
The DTSA also provides immunity to anyone who, for the purpose of reporting legal violations, discloses trade secrets to the government or a Gilbert employment attorney. This whistleblower provision is also significant in that it incentivizes employers to inform their employees about the protections offered to whistleblowers. For employers to have access to the maximum protection and remedies available under the DTSA, they must inform their employees regarding the existence of the whistleblower protections contained in the Act.
This section of the DTSA has potentially significant implications for both employees and employers. Employers should consider revising employment agreements and policies to make their employees aware of the new DTSA provisions. Likewise, employees would do well to familiarize themselves with the protections offered by the DTSA.
The DTSA has a significant impact on intellectual property rights in Arizona, and chances are it has, does, or will affect almost every American. Its long reach and broad definitions mean that many day-to-day business activities fall under its provisions. At the end of the day, the DTSA seems to have as a primary purpose to provide additional protection to trade secret owners, by providing them direct access to federal court for trade secret misappropriation claims, as well as a variety of new remedies and other protections. However, the act also considers the impact of trade secret protections on employees, and contains provisions impacting a wide range of entities involved in intellectual property disputes.
As the DTSA demonstrates, intellectual property is a complicated field of law, and can get confusing fast. It is important to be well advised when making decisions that could have an impact on your trade secrets and other intellectual property. The attorneys at Denton Peterson, P.C. have decades of experience in handling anywhere from the simplest intellectual property matters up to the most complex and involved trade secret disputes. No matter what your concern is regarding your intellectual property, the skilled intellectual property attorneys at Denton Peterson are ready and qualified to make sure your rights are protected.