Defend Trade Secrets Act Signed into Law by President Obama

Up until about a month ago, trade secret law was dominated by state laws and state courts. The rights a company had to pursue damages and protect misappropriated intellectual property due to the theft of trade secrets was largely limited to state-based remedies. It is true that criminal penalties for the misappropriate of trade secrets under federal law served as an important deterrent regarding the misappropriation, but this gap in federal law could leave companies with limited options following the theft of company or corporate IP. Recent Congressional action signed into law by President Obama, however, has drastically altered the legal calculus regarding the remedies a company has following a breach regarding trade secrets.

Attorney William Heyman has more than 20 years of practical legal experience handling trade secret concerns and commercial litigation issues. Mr. Heyman has handled complex business litigation matters throughout his career. At the Law Firm of William S. Heyman he strives to provide high levels of client service and responsiveness so that businesses fully understand their legal options and are never in the dark about their legal concerns. To schedule a confidential legal consultation call (410) 305-9287 or contact the firm online.

Federal Trade Secret Legislation Supplements State Law Options

The Defend Trade Secrets Act (DTSA) was signed into law on May 11, 2016, by President Obama. The remedies contained in the bill are immediately available to corporations and businesses affected by a misappropriation of their trade secrets. Under DTSA there is a mechanism for a federal ex parte seizure. An  ex parte seizure under DTSA allows for a plaintiff to petition a court to order a seizure of property that is necessary to prevent the dissemination of the trade secret. Since the proceeding is ex parte, it can be brought without notice to the allegedly misappropriating party or parties. As with all ex parte proceedings, the moving part must satisfy a high standard for a court to grant the motion which generally limits granting of motions of this type to exigent circumstances. In circumstances where there is a risk of a particularly large theft of trade secrets or when, absent an injunction, other harm would be imminent and unavoidable. To balance potential abuses of this mechanism, the law also provides for damages for wrongful seizures.

The law also provides for remedies including damages for actual loss caused by trade secret misappropriation. It is also possible to seek a reasonable royalty for unauthorized use of trade secrets. In the case of a willful or bad faith misappropriation, exemplary damages are available. Finally, the law contains a fee-shifting mechanism for more egregious misappropriations.

Inevitable Disclosure Doctrine Is Rejected by DTSA

Under the DTSA, the inevitable disclosure doctrine is explicitly rejected. That doctrine allows a party to obtain an injunction due to mere possession of knowledge regarding a trade secret without further action. However,  the DTSA does permit an injunction on the basis of a “threatened misappropriation” by an employee or contractor. Furthermore, in the context of a threatened misappropriation, the DTSA also narrows the scope of improper means to exclude “reverse engineering, independent derivation, or any other lawful means of acquisition.”

Review of Employment Contracts Is Necessary due to DTSA Notice Provisions

Under the DTSA, there is language that requires employers to give notice to employees and independent contractors regarding whistleblower immunity provided by the law. Under the law, agreements that set forth permitted and prohibited uses of trade secrets and confidential company IP must include this notice if it is executed or amended after May 11, 2016. Employers do have the option to incorporate this language by reference, but contracts should be reviewed to ensure that the notice provided is adequate. Therefore, a careful review of all relevant contracts is a prudent step for employers with agreements of this type to take.

Work with an Experienced Baltimore Trade Secrets Lawyer

Baltimore trade secret attorney William Heyman and the Law Firm of William S. Heyman can provide legal guidance and litigate issues arising from the misappropriation of trade secrets. Mr. Heyman has more than 20 years of experience in commercial litigation and can put this knowledge to work for your business. To schedule a confidential legal consultation, call (410) 305-9287 or contact the firm online.