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President Obama signed the Defend Trade Secrets Act into law last week, giving powerful new tools to companies looking to protect their trade secrets from misappropriations.
The act adds two major weapons to the corporate legal arsenal: a federal cause of action for trade secrets theft and a civil seizure mechanism that gives the act some serious bite. But it also places new requirements on employers. Here's what in-house counsel should know.
Getting in to Federal Court Just Got Easier
Prior to the DTSA, parties that wanted to litigate trade secret misappropriation claims in federal court had to establish diversity jurisdiction. That's no longer the case.
Under the new law, an owner of a misappropriated trade secret "may bring a civil action ... if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce."
The new federal cause of action isn't intended to preempt state trade secrets laws, however. Rather, it's meant to act in conjunction with them, giving parties easier access to another forum to pursue their claims.
DTSA Civil Seizure
Besides the federal cause of action, the most noteworthy change that the DTSA makes is to allow the civil seizure of property in order to prevent trade secret theft. Under the act, a court may "issue an order providing for the seizure of property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action," while the court case is pending. In order to obtain ex parte seizure, a party must provide clear and specific evidence showing that irreparable injury would occur without the seizure.
If the court finds trade secret misappropriation, the law allows for a wide range of relief, from injunctions, to royalty payments, to exemplary damages and attorney's fees.
Employer Notification Requirements
The DTSA also establishes new employer notification requirements. Under the act, employers are required to provide "notice-of-immunity" to employees and contractors, Dennis Crouch writes on Patently-O.
The Act creates a new form of whistle-blower immunity, related to the disclosure of confidential information to the government or in litigation. Under the act, such disclosures would be immune from trade secrete misappropriations claims. Employers are required to give their employees or contractors a heads up about the immunity, "in any contract or agreement with an employee [or independent contractor] that governs the use of a trade secret or other confidential information."
That means it's time to revise your corporate confidentiality agreements, in-house attorneys.