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New Federal Law Will Provide First-Ever Civil Claim for Theft of Trade Secrets

On April 27, 2016, the U.S. House of Representatives approved the Defend Trade Secrets Act, S. 1890, by a vote of 410-2.  The Senate approved an identical bill 87-0 on April 4, 2016.  President Obama is expected to sign the DTSA into law in short order.  Once effective, the DTSA will create a federal, civil cause of action for trade secret misappropriation for any act that “occurs on or after the date of the enactment” of the law.  In addition to providing plaintiffs an opportunity to obtain injunctive relief and monetary damages, the DTSA will further allow for ex parteseizures of misappropriated trade secrets.

The DTSA borrows from the Uniform Trade Secret Act (the “UTSA”).  For example, the DTSA’s misappropriation, improper means, and three-year limitations provisions are all copied from the UTSA.  At the same time, the DTSA does not preempt state trade secret law or other sections of the U.S. code pertaining to trade secret misappropriation.  Finally, the DTSA directs government officials to report on exterritorial trade secret misappropriation.

The DTSA’s seizure provision is a notable addition vis-à-vis the UTSA.  It allows courts to issue an ex parte order to seize property as “necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.”  To obtain such an order, a party must meet eight distinct prerequisites—including showing that a temporary restraining order is inadequate, that immediate and irreparable injury will occur if the seizure is not approved, and that the harm to the applicant outweighs the legitimate interests of any party from whom material is seized.  The party seeking an ex parte seizure order must post security and is subject to a claim for any damage caused by a wrongful seizure.  The raft of requirements intentionally set a high bar to issuance of an ex parte seizure order.  It is a powerful tool, but also susceptible to abuse absent strict controls.  The DTSA’s ex parte seizure requirements strike the right balance between need and caution.

The DTSA provides district courts with “original jurisdiction of civil actions brought under” the DTSA.  The DTSA does not contain any specific venue provisions and therefore an aggrieved party must look to the general venue statute for civil actions in deciding choice of venue in a federal district court.  In addition, plaintiffs may be able to bring a claim alleging a violation of Section 337 of the Tariff Act of 1930 in the U.S. International Trade Commission, depending on the circumstances.  Plaintiffs deciding upon a venue in which to bring a DTSA claim should analyze differences between the DTSA and any potential state law or other federal claim.

The DTSA explicitly applies to “interstate or foreign commerce.”  While the DTSA does not expand upon “foreign commerce” in any meaningful way, Section 4 of the DTSA requires various governmental officials to report on trade secret misappropriation experienced by U.S. companies that occurs abroad.  In particular, one year after the DTSA is enacted, and every two years thereafter, the Attorney General, the Intellectual Property Enforcement Coordinator, and the Director of the USPTO must submit a report to the House and Senate Judiciary Committees pertaining to trade secret theft occurring abroad.

The DTSA is an important development in U.S. law, as it provides the first-ever federal law providing a private civil claim for trade secret misappropriation.  The rationale for the DTSA is the belief by Congress, the Obama Administration, and stakeholders that the current patchwork of state laws is inadequate to address trade secret misappropriation and the concomitant damage it causes to trade secrets rights holders and to the U.S. economy.  Time will tell whether the law achieves its intended purposes.

© Copyright 2018 Squire Patton Boggs (US) LLP

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About this Author

John J. Thuermer, Patent Prosecution Attorney, Squire Patton Boggs, Cleveland Law firm
Associate

John Thuermer’s practice focuses on intellectual property litigation and patent prosecution. John has litigated intellectual property cases involving utility and design patents, trademarks, copyright, and trade secrets before various federal courts, the United States International Trade Commission and the American Arbitration Association.

John also prepares patent applications and office action responses across a variety of technologies in chemical, mechanical and consumer goods arts. He has prepared numerous invalidity, non-infringement, and...

216-479-8765
Steven Auvil, Squire Patton Boggs, intellectual property attorney
Partner

Steve Auvil leads our Intellectual Property & Technology Practice Group’s litigation practice in the US, and his practice is focused on litigation of intellectual property (IP) disputes. As an engineer and patent lawyer, he has been exposed to a wide variety of technologies, including control systems, power electronics, communication systems, medical devices, steel production, complex mechanical systems and software systems. Steve has been listed in Chambers USA Leading Lawyers since 2007 and The Best Lawyers in America since 2006.

In more than 20 years of practicing law, Steve has served as lead trial counsel and successfully represented clients in numerous patent, trade secret, copyright and trademark/trade dress cases in federal district courts throughout the US. He has also argued several patent-related appeals before the US Court of Appeals for the Federal Circuit. In addition, he has handled a significant number of disputes before US administrative agencies, including 337 actions before the US International Trade Commission and proceedings before the Patent Trial and Appeals Board. Finally, Steve has represented clients in IP-related disputes before arbitration tribunals.

While Steve’s practice focus is in litigation, he has considerable non-litigation experience, including counseling clients on IP matters, preparing and prosecuting patent applications, and negotiating agreements that involve IP.

Steve is an active member in a number of professional organizations, including the American Bar Association, American Intellectual Property Law Association (AIPLA), Cleveland Intellectual Property Law Association (CIPLA) and Federal Circuit Bar Association. He served as president of CIPLA during 2009-2010 and has held a number of leadership positions in AIPLA.

Steve is a frequent speaker on IP law topics and has spoken to clients, industry groups and IP organizations throughout the US and abroad on topics ranging from US Supreme Court jurisprudence to patent law to the Defend Trade Secrets Act.

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David Elkins Attorney Patent Litigation Squire Patton Boggs
Partner

David Elkins has led our global Intellectual Property & Technology Practice Group since 2010. Based in Silicon Valley, David serves as lead trial and arbitration counsel in patent, trademark, trade dress, trade secret, false advertising and copyright actions nationwide.

Following outstanding client feedback, David has been named a “star lawyer” in the Acritas Stars™ global database in 2017 and 2018: “He’s a very dedicated lawyer and we can have full confidence and trust that he will act in our interests”; “The quality of his advice: it is...

650-843-3378