Defend Trade Secrets Act of 2015 Would Create a Federal Private Right of Action for the Misappropriation of Trade Secrets

On July 29, 2015, with bipartisan support, Congressional leaders in both the House and the Senate introduced identical bills, HR 3326 and S. 1890, respectively, entitled, the “Defend Trade Secrets Act of 2015” (“DTSA 2015”). The proposed legislation attempts to authorize a private civil action in federal court for the misappropriation of a trade secret that is related to a product or service used in, or intended for use in, interstate or foreign commerce. Additionally, the proposed legislations seeks to (a) create a uniform standard for trade secret misappropriation; (b) provide parties pathways to injunctive relief and compensatory damages; and (c) create remedies for trade secret misappropriation that are similar to other violations of intellectual property rights, for example, including exemplary damages and attorneys’ fees available in the event of willful and malicious misappropriation of a trade secret. An interesting feature of the DTSA 2015 is the availability of an ex parte seizure order for plaintiffs fearful of the dissemination of their trade secret(s). The proposed ex parte seizure allows for the government to seize property necessary to prevent the propagation or dissemination of the trade secret prior to giving notice of the lawsuit to the defendant.

Even though the DTSA 2015 follows on the heels of the unsuccessful attempt last year to pass the “Defend Trade Secrets Act of 2014” (“DTSA 2014”), the continued legislative proposals indicate a continued desire and potential need for a uniform federal remedy in the area of Trade Secret law. Recent cyberattacks for example have exposed a vulnerability of trade secret misappropriation not only for American corporations, but also for the United States Federal government. With the advent of smartphones and the internet, misappropriated information may be widely disseminated in a matter of minutes. A recent law review article has suggested that the proposed legislation provides an accurate and industry favored remedy for reducing the digital and global risk of trade secret misappropriation.

However, the proposed legislation does not have unanimous support. Like the DTSA 2014, the proposed legislation faces academic criticism. Last year, 31 law professors urged Congress to reject the proposed DTSA 2014 in a letter. The law professors cited five primary reasons: (1) effective state law exists, (2) the Act will weaken the uniformity of state law while simultaneously creating a redundant and/or damaging parallel law, (3) the Act is imbalanced and could be used for anti-competitive purposes, (4) the Act increases the risk of accidental disclosure of trade secrets, and (5) the Act may have a negative impact on access to information, collaboration among businesses, and employee mobility. However, in August 2015, only two of these 31 law professors signed a new letter to Congress renewing their opposition to DTSA 2015.

The DTSA 2015 will likely not be voted on until the new calendar year. However, there has been a recent uptick in Congressional bipartisan support, numbering 30 cosponsors in the House and 6 cosponsors in the Senate. The building bipartisan momentum, in combination with the marked decrease in academic criticism, may provide the combination necessary to pass the DTSA 2015. Gibbons P.C. will continue to monitor the progress of HR 3326 and S.1890 through Congress.

Thomas J. Bean is a Director in the Gibbons Intellectual Property Department.
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