Federal Trade Secret Protection is Here

Federal Trade Secret Protection is Here; Make Sure You Hire an Attorney Who Understands Trade Secret Law and Is Used to Working in Federal Court

On May 11, 2016, President Obama signed the “Defend Trade Secrets Act” (DTSA) into law. The DTSA creates a federal statute for the theft of trade secrets as an additional claim within the Electronic Espionage Act.  18 U.S.C. §1831 et. seq.

A trade secret is any information which is not generally known (it is protected by a business) and provides an economic advantage for a business over its competitors.  When trade secrets are stolen, the use or release of that information can destroy a business. Now that the Federal government has enacted the DTSA, hiring the right attorney with the right Federal Court experience has become paramount.

State Law on Theft of Trade Secrets and the DTSA

Historically, trade secret cases relied on state law because there was no federal statute.   The primary consequence of no federal law resulted in a lack of uniformity in how trade secret issues were treated and examined.

State Bar Associations took it upon themselves to propose the Uniform Trade Secrets Act (UTSA) which has been adopted in nearly every state (only Massachusetts and New York have not fully adopted the UTSA).   The UTSA provides some coherence on trade secrets, but States still only view each other’s decisions as “Advisory,” instead of as “Precedential.” They don’t have to follow each other.  As different rules develop in each State the laws governing trade secret claims varied considerably even after the adoption of the UTSA.

The New Advantages Under the DTSA

The DTSA makes the Federal Court a much more attractive and fearsome venue to pursue those who steal trade secrets in today’s global world, by adding additional means of enforcement. This becomes even more apparent when you recognize that most trade secrets are now kept in some form of electronic media connected to the internet.

Considering that downloading or destructing electronic data from a device connected to the internet without permission is a violation of the Federal Computer Fraud and Abuse Act (CFAA), 18 U.S.C. §1030, the DTSA provides an additional Federal Statute to the CFAA and the CSA (don’t you just love acronyms?). Further, online communications stored in the cloud, or at an ISP are protected from improper access by the Federal Stored Communications Act (SCA), 18 U.S.C. §2701 et seq.  By combining these civil economic espionage statutes with other viable federal and state claims that can be heard in one proceeding, the Federal Courts become the most important and strongest venue for protecting your trade secrets against theft.

Knowing this, it is important to know what DTSA brings to the table.

Early Seizure Remedy

The most significant new feature of the DTSA is the ability to offer those who fall prey to misappropriation a way to reduce the harm of having their trade secrets stolen by allowing courts to impose an Ex Parte Seizure of Property. This is an expedited process which allows “for the seizure of property necessary to prevent the propagation or dissemination of the trade secret.”  While the ability to immediately stop the transmission of the trade secret is key in preserving the trade secret’s value, the law’s expedited procedures for seizure come at the cost of a lengthy list of requirements a party must establish before the court will act on a request for an early seizure.

The Future under DTSA

In Federal Court, the DTSA will likely unify the litigation process fighting trade secret theft with nationwide and standardized procedures and rulings. The DTSA does not overrule existing state laws covering trade secret theft. Therefore, expect State law claims to be brought in the same Federal Court proceeding for additional remedies.

All of these various available statutes for theft of trade secrets, and their attendant burdens of proof and procedures, creates an unprecedented need to hire an attorney who is intimately familiar with the law surrounding the theft of trade secrets and the methods of protecting those secrets, along with a well standing history practicing in Federal Court.  The time of the novice attorney trying to figure out their way through a simple and single state law trade secret claim is over.