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6 Things You Need to Know About the Defend Trade Secrets Act (DTSA) of 2016

Trade secrets are tempting gems of theft for unsavory competitors wishing to edge out the very businesses that created them or ungrateful employees looking to cash in on someone else’s work. They come in the form of patterns, formulas, programs, devices, methods, processes or techniques; and for some companies, they are the financial lifeblood of the organization.

President Obama signed a new law that provides added protection and recourse for the rightful owners of misappropriated trade secrets. The Defend Trade Secrets Act of 2016 is a huge milestone for those who have interests in trade secrets as it gives Federal Courts the ability to manage and hear these types of cases.

While this is big news from a legal standpoint, what does it actually mean for those who tightly guard their own trade secrets? Let’s take a look at 6 of the most salient points regarding this new act.

  1. Trade secret protection isn’t new; however, it has been extended. In years past, trade secret lawsuits were limited to the laws of individual states through the Uniform Trade Secrets Act (UTSA) of 1979 or different state laws. As a result, there could be varying levels of protection in different states which could be problematic for national businesses. Now, those businesses have the option to proceed by pursuing their own cases at the Federal level, by creating a federal private right of action for the trade secret owner. This protection is the same across the nation without regard to whether a state law may differ.

  2. The DTSA of 2016 was designed to protect state and national economies. Almost everyone who uses digital media is acutely aware of information security and privacy protection measures, but most of us are defenseless against tech-savvy hackers. This act was signed partially because of this reason. It’s a crime to steal the “secret sauce” of any company, no matter where you are from.

  3. An employee is allowed to reveal a company’s trade secrets if such revelation is done to authorities as part of a whistleblower action. The DTSA requires employers to inform employees of this immunity. If the notice is not given, then the employer cannot be awarded punitive damages or attorney’s fees against an employee that actually misappropriates a trade secret.

  4. Speaking of damages, the DTSA of 2016 also allows for increases in maximum damages of up to 3 times the amount of loss. Prior language, at most state, levels would allow for a maximum of 5 million dollars, which is sometimes a drop in the bucket when compared to the actual loss of what makes a competitor competitive.

  5. It’s easier to seize the property (email, disks, etc.) that may contain the proprietary information without the knowledge of the possessor beforehand. Yes, there are several caveats to this ability, such as substantial supporting evidence. However, this is a new addition that will help return the information sooner and mitigate losses all around.

  6. Lastly, this act also protects disclosure of trade secrets to the Court without the ability of the public to access that information. At times, the nature of the proprietary information is relevant and material to these types of cases, and the Court needs to understand the context in order to make a ruling. However, this information will remain redacted from public view.
Whether it is the secret formula for a certain soft drink, the colonel’s 13 herbs and spices, or a smaller company’s pattern for manufacturing widgets, a company’s trade secrets are invaluable assets. The DTSA of 2016 allows for uniform protection of those secrets in federal court. Given the ability of more and more companies to enter interstate and international trade, the ability to prosecute a civil lawsuit in federal is an exceedingly valuable gift given by the DTSA.

About the Author

Lisa M. Molsbee, J.D. is an associate attorney at Christensen Law Group, PLLC. She is an expert in appellate practice, employment issues, litigation, subrogation and insurance. You can read more about her and her legal experience here.

POSTED May. 5, 2016 | SHARE NEWS