Senate Judiciary Committee Approves Federal “Defend Trade Secrets Act”

In a prior post, Feds Focus on Trade Secrets, we noted that federal lawmakers had introduced two bills designed to provide a federal civil remedy for trade secret theft.

top secret envelopeIn late January 2016, the Senate Judiciary Committee approved the Senate version of the legislation (S. 1890) called the Defend Trade Secrets Act (“DTSA”).  The bill will likely be brought to the Senate floor for a vote, and is expected to pass.

This is a big deal, since previously trade secret claims could be pursued only under state law.  (Most states have adopted some variation of the Uniform Trade Secrets Act.)  One legal commentator has stated the impending DTSA passage will be a “watershed event in trade secret law” and “will be to trade secret law what the creation of the Federal Circuit was to patent law.”

Here is a re-cap of the final amendments made by the Senate to the DTSA:

  • The language allowing ex parte seizures has been tightened; seizure is now available only in “extraordinary circumstances” and the court must find that the person against whom seizure would be ordered has “actual possession” of the trade secret material.
  • Injunctions must be supported by proof of an “actual or threatened misappropriation” and an injunction cannot “prevent a person from entering into an employment relationship.”
  • Exemplary damages were reduced from up to three times actual damages to up to two times actual damages.
  • Whistleblowers who disclose trade secrets either in confidence to government officials or in a lawsuit alleging retaliation by an employer are now protected by “safe harbor” provisions.
  • The statute of limitations has been reduced from five years to three years.

Stay tuned for further developments.