Defend Trade Secrets Act Creates Federal Jurisdiction Over Misappropriation Claims

dtsa-selectedCongress recently passed the Defend Trade Secrets Act (“DTSA”), vesting federal courts with the power to hear trade secret theft disputes and act immediately to resolve them. The DTSA took effect May 12, 2016, and further empowers American innovators to protect their intellectual property from theft.

The DTSA defines “trade secret” as any type of information, regardless of its form and how it is stored, for which the owner has taken “reasonable measures” to maintain its secrecy.  The information must also derive “independent economic value” from it not being generally known and not readily ascertainable through proper means. Examples include customer lists, confidential formulas and manufacturing processes.

Prior to passage of the DTSA, trade secret owners were required to bring an action in state court under individual state trade secret laws or to rely on federal prosecutors to bring criminal charges under the Economic Espionage Act.  Not surprisingly, trade secret protection has suffered from a lack of uniform results nationwide and costly, ineffective enforcement.  The DTSA creates a uniform framework for federal trade secret civil lawsuits. Its provisions are consistent with the protections for other forms of federally-recognized intellectual property, such as patents, trademarks and copyrights. The DTSA does not replace state laws, but rather supplements them with additional rights.

The DTSA allows a trade secret owner to file suit within three years of a misappropriation, and provides reasonable royalties, monetary damages or injunctive relief.  Overall, the DTSA provides trade secret owners more direction in crafting consistent policies to secure their trade secrets. Companies should nonetheless maintain strong security over trade secrets, such as regularly reviewing confidential information to see if any trade secrets exist and reasonably maintaining that information to ensure it stays a secret.  Companies should also develop a response plan for both misappropriations and seizure orders.

If your company has confidentiality agreements with employees, you must provide to them written notice of the DTSA whistleblower protections.  Failure to inform employees will preclude companies from recovering punitive damages or attorneys’ fees in any actions against the employee. For more information about DTSA protections and compliance, contact Marcus & Boxerman at (312) 216-2720 or


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