Congress Passes Federal Trade Secrets Legislation


On April 27, 2016, Congress passed federal trade secrets legislation titled the “Defend Trade Secrets Act” or “DTSA.” The legislation passed in the Senate by an 87-0 vote and in the House by a 410-2 vote. The bill now will go to the desk of President Obama, who has indicated he intends to sign the DTSA into law. DTSA amends the Economic Espionage Act to allow companies to sue in federal court for trade secret misappropriation. Prior to passage of the DTSA, Federal law only governed criminal enforcement and prosecution of misappropriation of trade secrets and private parties lacked a federal claim for trade secret theft and were left to file claims under their respective state law. The DTSA aims to create uniformity with respect to trade secret proceedings by creating a common standard through federal case law.

Along with DTSA creating a private federal cause of action for trade secret misappropriation, it also provides parties a method for injunctive relief and monetary damages to preserve evidence, prevent disclosure of trade secrets, and account for economic harm to companies. Additionally, DTSA creates remedies for misappropriation of trade secrets similar to remedies in place for other forms of intellectual property. However, DTSA does limit an employer’s ability to obtain injunctive relief to protect actual or threatened misappropriation of trade secrets and provides protections for employees. Pursuant to DTSA, a court will not grant injunctive relief for actual or threatened misappropriation of trade secrets if the injunctive relief would prevent an employee from entering into an employment relationship. Moreover, a court is only authorized to place conditions on a new employment relationship if the employer can show threatened misappropriation based upon more than just the information the employee knows.

Lastly, the DTSA contains a whistleblower immunity provision to protect individuals from criminal or civil liability for disclosing a trade secret if it is made in confidence to a government official, directly or indirectly, or to an attorney, and it is made for the purpose of reporting a violation of law. This provision further requires employers to inform their employees about the immunity “in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.”

The DTSA likely will spur an increase of trade secret litigation as businesses look to protect such assets. Businesses across the nation will argue that state law protections for trade secrets are ineffective or inadequate. In addition, the fact that the DTSA authorizes harmed parties to seize stolen trade secrets in “extraordinary circumstances” may reduce the potential injury they face and should now be assessed as part of any business’s strategic planning for protecting trade secrets. Ultimately, the passage of DTSA merely demonstrates the growing economic concerns for misappropriation of trade secrets in this country and globally.

The St. Louis employment attorneys at McMahon Berger have been representing and counseling employers across the country in labor and employment matters, including the protection of trade secrets, for over sixty years, and are available to discuss these issues and others.  As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation as every situation must be evaluated on its own facts. The choice of a lawyer is an important decision and should not be based solely on advertisements.