December 08, 2016 Articles

Defend Trade Secrets Act: Filing Considerations in Trade Secret Actions

An update on where things stand with trade secret misappropriation cases six months following the passage of the Defend Trade Secrets Act.

By Stephanie E. O'Byrne – December 8, 2016

Since it was signed into law in May 2016, the Defend Trade Secrets Act (DTSA) has provided companies a cause of action to pursue damages and injunctive relief for trade secret misappropriation in federal court.

Thus far, over 60 federal actions have been filed with DTSA claims, many of which also allege a violation of the forum state’s Uniform Trade Secrets Act (UTSA) and a variety of state law remedies, such as breach of contract, breach of fiduciary duty, tortious interference with prospective economic operations, and common law unfair competition. About a dozen temporary restraining orders (TROs) and preliminary injunctions have been granted in these actions, all of which were justified on the basis of noncompete clauses in employment agreements.

There have been no applications under the new DTSA “civil seizure” provision, which uniquely allows the federal court, on an ex parte application and under extraordinary circumstances, to issue an order seizing property “necessary to prevent the propagation or dissemination of the trade secret” at issue in the litigation. 18 U.S.C. § 1836(b)(2)(A)(i) (2016). Therefore, at this time, there are no decisions offering current guidance on what facts are necessary to demonstrate a threat of “immediate or irreparable injury” or circumstances that suggest that a party would “evade, avoid, or otherwise not comply” with a court’s judgment, sufficient to justify an ex parte seizure under the DTSA. 18 U.S.C. 1836(b)(2)(A)(ii)(I) (2016).

Thus, as DTSA cases filed to date look very much like UTSA/noncompete cases, the extent to which a federal action offers discrete advantages remains unclear. Some considerations follow

Premium Content For:
  • Litigation Section
Join - Now