On April 27, 2016, the U.S. House of Representatives passed, almost unanimously – 410 to 2 – the “Defend Trade Secrets Act of 2016” (“DTSA”). The DTSA was previously approved by the U.S. Senate, and now heads to President Obama’s desk for signature. The President has praised DTSA and is expected to sign it into law. DTSA amends Chapter 90 of Title 18, United States Code.
One of the much-touted advantages of the DTSA is that it will bring uniformity to trade secrets law, which presently falls within the purview of state law. However, unlike patents and copyrights, which are expressly mentioned in the Constitution, Congress only has authority to legislate trade secrets law under the Commerce Clause of the United States Constitution. As such, only interstate – not intrastate – trade secret disputes will be covered by the DTSA; intrastate trade secret disputes will remain solely within the purview of state law. Indeed, the DTSA itself expressly states that: “Nothing in the amendments made in this section shall be construed to…preempt any other provision of law.” (DTSA, Section 2(f)). The reality is that DTSA will necessarily have to co-exist with existing state law.
Another much anticipated aspect of DTSA is that it will bring federal question jurisdiction to trade secret disputes. Once again, however, DTSA will only provide this benefit where interstate disputes are at issue.
The law also includes a much-debated and somewhat controversial “ex parte seizure” provision, which allows plaintiffs to ask courts to order law enforcement officials to seize any property “necessary to prevent the propagation or dissemination of the trade secret.” (DTSA, Section 2(a)). In order to avail themselves of this provision, however, plaintiffs will need to provide an affidavit or verified complaint attesting to, among other things, that the information is indeed a “trade secret” and that the defendant actually has possession of it. Moreover, such relief can only be granted under “extraordinary circumstances,” the nature of which forthcoming case law will undoubtedly flesh out. In addition, in an effort to further curb abuse of this provision, damages may be awarded to the defendant for “wrongful or excessive” seizure.
One of the effects of DTSA will most certainly be an increase in trade secrets litigation. With the increased availability of federal question jurisdiction and access to the federal courts, under a uniform federal law, an increase in claims asserted is bound to result. However, nothing would preclude a Plaintiff in such a case from asserting state law trade secret claims along with DTSA claims. Just as with trademark law and the federal Lanham Act, trade secrets law and the DTSA will co-exist with existing state law.
If you have any questions about the DTSA or its potential impact on business, please contact Stephen H. Jett.