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DTSA’s Ex Parte Seizures of Property: A Drastic Trade Secret Remedy

April 16, 2021

DTSA’s Ex Parte Seizures of Property: A Drastic Trade Secret Remedy

April 16, 2021

Home » Resources » IP Law Essentials

Following up on our recent blog on trade secrets damages, here we look at the Defend Trade Secrets Act (DTSA)’s provision of injunctive relief. Specifically, the DTSA allows trade secret plaintiffs to request a unique remedy—an ex parte seizure of the defendant’s property.

What is an ex parte seizure?

An ex parte seizure allows a court to seize property without the property owner’s consent. The DTSA authorizes courts to seize “property necessary to prevent the propagation of or dissemination of the trade secret.”[1] So, in a trade secret case, the plaintiff might request the court seize the defendant’s property at the beginning of litigation (for example, when the complaint is filed), so that the defendant will not be able to “propagate” or “disseminate” trade secrets while the case is being litigated. Thus, an ex parte seizure preemptively prevents imminent harm during the pendency of trade secret litigation.

What property can be seized?

Property in this context includes any physical item that might contain allegedly stolen trade secrets, e.g., laptops, mobile devices, computer hard drives, paper documents, etc.

When will a court approve an ex parte seizure?

Because an ex parte seizure is a drastic injunctive relief remedy, the DTSA allows a court to issue an an ex parte seizure of property “only in extraordinary circumstances.”[2]

In order to show “extraordinary circumstances,” the DTSA requires that the plaintiff must:[3]

  • Describe with reasonable particularity what is to be seized and where it is located;
  • Not publicize the requested seizure; and
  • Provide security for any damages the defendant or related third parties may suffer if the court later determines that the seizure was wrongfully granted.

A plaintiff must also prove that the defendant would “evade, avoid, or otherwise not comply with” an order for other injunctive relief, like a temporary restraining order (TRO) under Rule 65 of the Federal Rules of Civil Procedure.[4]

Notably, a plaintiff is assumed to have specific knowledge about the defendant to describe with reasonable particularity the extraordinary circumstances that exist.

What are the pre-filing steps for an ex parte seizure application?

Prior to filing an ex parte seizure application, a plaintiff must arrange for the logistics of the actual seizure. A plaintiff is required to:

  • Arrange for a U.S. marshal to do the seizing;
  • Arrange for an independent technical expert to accompany the U.S. marshal (i.e., not plaintiff or plaintiff’s counsel);
  • Arrange for any practical necessities with respect to the seizure (e.g., locksmith, transportation service, substitute custodian);
  • Prepare contracts between the court and experts that might accompany the U.S. marshal; and
  • Schedule pre-seizure briefing.

What are some illustrative cases?

By and large, courts have been hesitant to provide the draconian remedy of physically seizing property, in part because it is difficult to measure the harm the defendant could face as a result. For example, having a hard drive seized might mean far more than preventing a defendant from accessing alleged trade secret information; it might also mean that the defendant is unable to carry out its regular and daily business functions. However, a few courts have ventured into issuing limited ex parte seizure orders.

The most widely cited ex parte seizure order, Mission Capital Advisor LLC v. Romaka, suggests that a history of bad acts by the defendant is necessary to meet the “extraordinary circumstances” requirement for an ex parte seizure.[5]

In Mission Capital, the defendant engaged in egregious conduct, including lying and failing to show up to hearings. The defendant evaded service of a previously issued TRO five times and failed to appear for the preliminary injunction hearing. The Court also found that the defendant had previously lied about deleting trade secret data off his personal computer, only for it to appear later in a forensic review. Based on this pattern of behavior, the Court found the defendant intended to misuse the plaintiff’s trade secret information.

Even though the Mission Capital Court did not analyze each separate requirement for an ex parte seizure, the Court found that each of the eight requirements under the DTSA were met.[6] The Court ordered a U.S. marshal to copy the stolen trade secrets and delete the files from the defendant’s computer as soon as possible. Notably, the Court did not authorize a forced entry if the defendant’s computer could not be seized. The U.S. marshal was limited in its actions if the defendant was not fair or did not allow entry.

Other courts also emphasize that a history of “bad acts” by the defendant is necessary to show “extraordinary circumstances.” In Axis Steel Detailing Inc. v. Prilex Detailing LLC, defendants had previously attempted to delete information from computers.[7] The Court granted an ex parte seizure order because the defendants showed a “willingness to provide false and misleading information.”

Although a history of bad acts might suffice to establish “extraordinary circumstances,” bad acts by themselves are not always enough to obtain an ex parte seizure. In Henry Schein, Inc. vs. Cook, a former employee attempted to erase emails that she had sent from her work computer.[8] Rather than issue an ex parte seizure order, the Court granted a Rule 65 temporary restraining order requiring data preservation.[9]

Similarly, in Balearia Caribbean Ltd. Corp. v. Calvo, despite the defendant’s history of bad acts, including reconfiguring his personal laptop to access the company’s IT systems, the Court refrained from issuing an ex parte seizure order, and instead issued a Rule 65 TRO.[10]

In other words, it appears that if a Court can achieve the intended outcome of an ex parte seizure order without issuing a remedy so drastic, i.e., by issuing a Rule 65 TRO instead, the Court might very well opt for that approach instead.

Conclusion

Even when taking the drastic measure of an ex parte seizure, there is a limit to quite how drastic a court is willing to be. It is likely that the court will place certain limits on the scope of the authorized seizure. For example, the court could limit the seizure to one eight-hour day or one contact list, like in Mission Capital.[11] The court could also limit the seizure to the defendant’s property and exclude any third-party property. And because a court might weigh whether a Rule 65 TRO in lieu of an ex parte seizure order will suffice, a trade secret plaintiff should also consider seeking a TRO before embarking on the application process for the more drastic ex parte seizure remedy.

More questions? Contact the authors or visit Fish’s Intellectual Property Law Essentials.

[1] 18 U.S.C. § 1836(b)(2)(A)(i).

[2] 18 U.S.C. § 1836(b)(2)(A)(i).

[3] 18 U.S.C. § 1836(b)(2)(A)(ii)(I)–(VIII).

[4] 18 U.S.C. § 1836(b)(2)(A)(ii)(I).

[5] Mission Capital Advisor LLC v. Romaka, No. 16 CIV. 5878 (LLS), 2016 WL 11517104 (S.D.N.Y. July 29, 2016).

[6] Id. at *2.

[7] Axis Steel Detailing Inc. v. Prilex Detailing LLC, No. 17-cv-428, 2017 WL 8947964 at *2 (D. Utah June 29, 2017).

[8] Henry Schein, Inc. v. Cook, 191 F. Supp. 3d 1072 (N.D. Cal. 2016).

[9] Id. at 1078–79.

[10] Balearia Caribbean, Corp. v. Calvo, No. 16-23300-CIV, 2017 WL 8780944, at *2 n. 2 (S.D. Fla. Aug. 3, 2017).

[11] Mission Capital Advisor LLC, 2016 WL 11517104 at *2.

 


The opinions expressed are those of the authors on the date noted above and do not necessarily reflect the views of Fish & Richardson P.C., any other of its lawyers, its clients, or any of its or their respective affiliates. This post is for general information purposes only and is not intended to be and should not be taken as legal advice. No attorney-client relationship is formed.

Blog Authors

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Esha Bandyopadhyay | Principal

Esha Bandyopadhyay, a principal in the Silicon Valley office of Fish & Richardson P.C., has been practicing intellectual property and technology-related commercial litigation and counseling in the Bay Area for close to two decades. She has successfully tried and...

Meaghan Luster | Associate

Meaghan Luster is an associate in the Boston office of Fish & Richardson P.C. She was previously a summer associate with the firm. During law school, Meaghan served as an executive comment editor for the Boston College Law Review and an executive editor of the Boston College Intellectual Property...