Defend Trade Secrets Act

The Senate and the House of Representatives passed the Defend Trade Secrets Act, a new federal law that governs intellectual property disputes. President Obama previously indicated that he will sign DTSA into law.  Previously, trade secret disputes were based only in state law, but the passage of the new federal law creates a uniform trade secret statute over all fifty states. For the first time, civil litigants may bring a claim under the Economic Espionage Act of 1996. The federal courts have the authority under the new law to issue ex parte seizure orders to prevent dissemination of a trade secret. Under the Supremacy clause in the constitution, a federal law that governs the same area as state law would preempt the state law, making it obsolete. While the DTSA expressly states that it shall not preempt any other provision of law; affirming the continuation of state laws like the California Uniform Trade Secrets Act, the DTSA does add additional layers of protection. And by using the DTSA, one can get claims heard in federal court – including not only the trade secret misappropriation claim, but also state law claims that can be lodged with it.

A major implication of the DTSA is that employers may file civil lawsuits in federal court for trade secrets misappropriation against departing employees.  Access to federal courts may lead to a streamlined approach to trade secret causes of action as they can rely on the broader discovery tools and nationwide subpoena power granted to federal courts.

On the other hand, the DTSA provides a layer of protection, namely civil and criminal immunity for employees and contractors who (1) disclose trade secrets in confidence to the government or their lawyers solely for the purpose of reporting or investigating a suspected violation of law, (2) disclose the trade secrets to their personal attorneys in connection with a lawsuit alleging retaliation for reporting a suspected violation of law, or (3) disclose or use the trade secret in any complaint or other document filed in a lawsuit, as long as they file the trade secret information under seal.

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