— Jessica Gutierrez Alm, Attorney
On Wednesday afternoon this week, President Obama signed the Defend Trade Secrets Act (DTSA) into law. The Act passed unanimously in the Senate and nearly so in the House. The President has been a proponent of the Act and was expected to sign it. But despite such otherwise unheard of bipartisan backing, the DTSA faced a lot of opposition from other sources.
Prior to this Act, trade secrets have been governed in the United States primarily by state law. While the Economic Espionage Act provided for criminal penalties for trade secrets misappropriation, civil remedies were confined to state actions. That is, if a victim of trade secrets misappropriation wanted to sue the misappropriator—such as a former employee—the suit would have to be brought in state court, and under state law. This has been a primary difference between trade secret protections and other forms of IP protection, including copyright, trademark, and patent, and was considered by many to be a weakness of trade secret law. While most states have adopted some version of the Uniform Trade Secrets Act in an effort to bring uniformity to trade secret enforcement, there are nonetheless state differences that can lead to potentially different outcomes depending on where a suit is filed.
The new DTSA amends the existing Economic Espionage Act to provide for a federal civil remedy for trade secrets misappropriation. The victim of misappropriation will now have the ability to sue in federal court, and under federal law.
The DTSA had sweeping support in Congress and was championed by companies like DuPont, Corning, General Electric, Eli Lilly, and others. Supporters of the Act argue for the need for uniformity among trade secret laws and for the need to access federal courts. Support for the new law also seemed to revolve around a need for preventing cyber espionage and foreign spies.
However, despite the overwhelming Congressional support for the new law, opposition came from several law professors, among others. Opponents to the law argued that the law would not fulfill its purported purpose of preventing foreign spies. Opponents also point to the fact that the DTSA does not expressly preempt state law, and thus will convolute existing trade secrets law by adding an additional layer of case law.
The new law also has a robust ex parte seizure provision that will allow plaintiffs to have defendants’ assets seized where “necessary to prevent the propagation or dissemination of he trade secret.” The seizure provision is stringent in that plaintiffs must make certain showings before obtaining a seizure order, but the provision does not place limits on the type or quantity of assets that may be seized. This provision is an anomaly in trade secrets law. No state trade secrets act allows for such seizure of assets. Proponents of the DTSA argue that the seizure provision will help protect against further loss of secrecy after a trade secret misappropriation and will provide for a fast and effective remedy. Senate Judiciary Committee Chairman Goodlatte described a dramatic hypothetical where “a thief sneaks into a facility, steals a trade secret and is headed to the airport to fly to China and sell it.” Opponents of the Act, however, argue that the seizure provision is not limited to such narrow plots, and instead, the provision will create hardship for businesses and lead to unnecessary litigation.
For better or worse, the DTSA was signed into law this week. Opponents and proponents will now need to work together to implement the new provisions in a way to best protect against all types of trade secret misappropriation.