Both House and Senate Passes Defend Trade Secrets Act (“DTSA”)

Takeaway: There will likely soon be a federal claim for trade secret misappropriation under the Defend Trade Secrets Act (“DTSA”). The DTSA:

— models the Uniform Trade Secrets Act and duplicates the definitions of “trade secret,” “misappropriation,” and “improper means”.

— offers immunity for whistleblowers and requires that employment contracts provide employees with notice of their immunity.

— provides for ex parte seizures of misappropriated trade secrets in “extraordinary circumstances where necessary to preserve evidence or prevent dissemination of a trade secret.”

— awards attorneys’ fees to the prevailing party if the defendant’s misappropriation was “willful and malicious” and/or if the plaintiff’s claims were meritless or made in “bad faith.”

The United States House of Representatives passed S. 1890, the Defend Trade Secrets Act of 2016 (“DTSA”), by an overwhelming majority vote of 410-2, and having been passed in the Senate by 87-0, and the bill is heading to the President to be quickly signed into law within the next couple of days. The Senate Report explains that the new federal remedies “are intended to coexist with, and not to preempt, influence, or modify applicable state law.”

In Kewanee Oil v. Bicron, the Supreme Court observed that “Congress, by its silence over these many years, has seen the wisdom of allowing the States to enforce trade secret protection.” Almost 40 years later, Congress has finally agreed that the federal government should enforce trade secret protection as well.

For many companies and industries, trade secrets are a critical element of their overall business strategy, valuable only when that ‘secret sauce’ doesn’t get into the wrong hands,” said Michelle Lee, under Secretary of Commerce for Intellectual Property and the Director of the United States Patent and Trademark Office. “Innovators, manufacturers, and entrepreneurs of all types will benefit greatly from a civil cause of action at the federal courts – providing a more uniform way to take action and stronger resources to prevent the transit of trade secrets out of the country. We applaud today’s bipartisan action, as it builds on the Administration’s unwavering commitment to arm businesses with a robust suite of intellectual property tools, vital to remaining competitive in a global and digital economy.”