One Step Closer to a Federal Private Cause of Action for Trade Secret Misappropriation: The Defend Trade Secrets Act

I have written in the past about efforts by Congress to create federal protection for trade secret violations, and today I write about the latest news about a potential federal private cause of action for trade secret misappropriation. On January 28, 2016, the Senate's Committee on the Judiciary voted in favor of the Defend Trade Secrets Act (the "Act"), which would create a federal private cause of action for trade secret theft. The Act is labeled Senate Bill 1890, and the current proposed text can be found here.

The Act currently has strong bipartisan support—the bill itself has 27 bipartisan cosponsors. The Senate's Committee on the Judiciary passed the Act by a voice vote and made certain amendments, and some of the key provisions in the current text of the bill are highlighted below:

  • The Act allows for seizure orders based on an ex parte application but only in extraordinary circumstances.
  • The Act allows for an injunction if "actual" or "threatened" misappropriation is shown. It is arguable that this provision for an injunction incorporates the inevitable disclosure doctrine by allowing an injunction for "threatened" misappropriation.
  • The Act allows for similar types of damages as the Uniform Trade Secret Act ("UTSA"), including (1) actual loss, (2) unjust enrichment, or (3) in lieu of other measures of damages, a reasonable royalty.
  • Similar to the UTSA, a court may award attorneys' fees where (1) a claim of misappropriation is made in bad faith, (2) a motion to terminate an injunction is made or opposed in bad faith, or (3) the trade secret was willfully and maliciously misappropriated.
  • A claim under the Act has a three year limitations period.
  • The Act provides measures for the trade secret owner to seal his or her trade secrets in court proceedings.
  • As part of the Act, the Attorney General is required to give an annual report to the Committee on the Judiciary that generally discusses the extent of the theft of the trade secrets of United States companies that is occurring outside the United States.
  • The Act also creates an immunity for individuals who act as whistleblowers and report suspected trade secret violations to federal, state, or local authorities.

Ultimately, the Act provides trade secret owners more protection by giving them alternative options to traditional state law for protecting their rights in the event of a misappropriation of their trade secrets. Given the heavy bipartisan support for the Act, there is a good chance that it will eventually be passed. We at Fish & Richardson will continue to monitor the Act and will report on any developments if and when the Act becomes federal law.

Author: Rex Mann