- Trade Secret Misappropriation is Now a Federal Cause of Action
- June 8, 2016 | Author: Cole Y. Carlson
- Law Firm: GrayRobinson, P.A. - Tampa Office
- On April 27, 2016, the U.S. House of Representatives nearly unanimously passed the Hatch-Coons Defend Trade Secrets Act of 2016 (“DTSA”), amending the Economic Espionage Act, and creating the first federal trade secrets law that private citizens can use to enforce their rights. The U.S. Senate had previously approved the legislation with an 87-0 vote meaning the bill will now head to President Obama’s desk for a signature. The White House had previously expressed strong support for the bill indicating it will likely be signed into law in the coming weeks.
The DTSA creates an alternative route for trade secrets holders to enforce their rights. Previously, rights holders only had individual state laws to protect their interests. Now, however, the federal courts will have original jurisdiction to hear a dispute (so long as the trade secret is related to a product or service that crosses state lines or national borders). Notably, the DTSA includes a provision preventing it from preempting other state or federal laws. This means that a rights holder could potentially bring a DTSA claim and a state law claim at the same time without the risk of having one claim dismissed. The DTSA has a statute of limitations of three years.
The civil seizure provisions should be noted. After the filing of a verified complaint or based on an affidavit, the court can, ex parte in extraordinary circumstances, order the “seizure of property necessary to prevent the propagation or dissemination of the trade secret” that is the subject of the suit. There are further requirements such as a showing of immediate and irreparable injury, likelihood of success in showing the information is actually a trade secret, and that the person would destroy, move, hide, or make inaccessible the information if given notice, among other requirements. A party seeking such an order must not have publicized the seizure beforehand.
There are a variety of remedies available. Upon a finding of liability, a court can (1) issue an injunction so long as it does not prevent an individual from entering an employment relationship or conflict with applicable state law; (2) award actual damages and damages for unjust enrichment; or (3) a reasonable royalty. Additionally, in the case of willful misappropriation, exemplary damages not more than twice the original damages amount are possible. Attorney’s fees are also available if a claim of misappropriation is brought in bad faith, a motion to terminate an injunction is made or opposed is brought in bad faith, or willful misappropriation is found.