Impact of Defend Trade Secrets Act on Pending Cases is Unclear
On Wednesday, President Obama signed the federal Defend Trade Secrets Act of 2016 (the “Act”) that passed both houses of Congress in late April. The statute is the first federal statutory protection afforded to trade secrets and could have a significant impact on trade secrets litigation nationwide. The passage of the law comes as no surprise, and much has already been written about what it means for the future of these disputes. But what about those who are currently involved in trade secrets litigation —could the Act change the course of those cases? There is not a definitive answer, but it is something that all litigants should consider now that the Act has become law.
The first question is whether the Act applies at all in such instances. The Act applies to “any misappropriation of a trade secret (as defined in section 1839 of title 18, United States Code, as amended by this section) for which any act occurs on or after the date of the enactment of this Act.” S. 1890, 1144th Cong. § 2(e) (emphasis added). “Misappropriation” is defined as “(A) 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 (B) disclosure or use of a trade secret of another without express or implied consent. 18 U.S.C. § 1839(5). So, in litigation where the “use” of trade secrets is ongoing, there may be an argument that the Act applies.
If the Act does apply to a pending case, the next question is whether the Act affords any relief that is not available under the state Uniform Trade Secrets Act. The Act provides for (1) injunctive relief, (2) an award of damages in the form of actual loss to the plaintiff and unjust enrichment to the defendant, or, alternatively, in the form of “reasonable royalty for the misappropriator’s unauthorized disclosure or use of the trade secret,” (3) punitive damages of no more than two times the amount of damages for willful and malicious misappropriation and (4) attorneys’ fees for willful and malicious misappropriation. 18 U.S.C. § 1836(b)(3). This relief mirrors that available under the vast majority of state statutes.
But there is an additional seizure provision in the Act that will make it enticing in certain contexts. The seizure provision can be invoked if a preliminary injunction or temporary restraining order “would be inadequate to achieve the purpose of this paragraph because the party to which the order would be issued would evade, avoid, or otherwise not comply with such an order.” 18 U.S.C. § 1836(b)(2)(A)(ii)(I). In other words, the seizure provision has an even higher standard than Federal Rule of Civil Procedure 65. The Act also contains its own irreparable harm provision—18 U.S.C. § 1836(b)(2)(A)(ii)(II)—and it requires the party seeking the seizure to “describe[ ] with reasonable particularity the matter to be seized and, to the extent reasonable under the circumstances, identif[y] the location where the matter is to be seized.” 18 U.S.C. § 1836(b)(2)(A)(ii)(VI). Seizure seems unlikely to apply in most ongoing cases, but it is something that must now be a part of the calculus for evaluating and litigating trade secrets claims.
The Act does not preempt state law trade secrets claims, so many currently pending trade secrets cases will be completely unaffected by the new statutory protections. But the potential application of the Act is something that litigants—particularly plaintiffs—need to carefully consider.