New Anti-Trade Secret Theft Law Awaits President's Signature

Author: Rena Pirsos, XpertHR Legal Editor

UPDATE: The DTSA was signed into law by President Barack Obama on May 11, 2016.

April 28, 2016

With theft of business trade secrets estimated to cost American businesses more than $300 billion a year, according to a 2013 report by the Commission on the Theft of American Intellectual Property, yesterday the US House of Representatives voted unanimously (410-2) to pass a bill - the Defend Trade Secrets Act (DTSA) of 2016 - that would standardize and strengthen businesses' current legal remedies and protections against trade secret theft. The DTSA was overwhelmingly passed by the Senate earlier this month. President Barack Obama is in favor of the measure and is expected to sign it into law.

Although theft of business trade secrets - computer algorithms, manufacturing strategies, formulas and processes, specialized designs and customer lists - is already a federal crime, businesses do not currently have the right to sue for it in federal court. Instead, companies must sue the thieves of this confidential information, who are often former employees, for related damages in state court where the laws have not developed uniformly. Every state, except New York and Massachusetts, has its own anti-trade secret theft law in place.

Without preempting the existing state laws, the DTSA would expand the Economic Espionage Act of 1996 to allow companies to file private civil suits in federal court for the illegal procurement of their intellectual property and confidential information. It also gives federal courts the power to seize, without prior notice, an alleged thief's property, such as electronic devices (e.g., cell phones and computers) that may contain stolen trade secrets, in order to preserve the property as evidence and prevent the further spread of the confidential information.

Under the DTSA, businesses that own trade secrets would be protected by a broad definition of trade that includes "all forms and types of financial, business, scientific, technical, economic, or engineering information" that they have taken reasonable steps to keep secret. The information must have independent economic value, meaning that the information must generally not be known or readily ascertainable.

Businesses that prevail in a lawsuit brought in federal court under the DTSA would be entitled to:

  • Monetary damages;
  • Injunctive relief, so as to prevent continued misappropriation of trade secrets; and
  • Attorney fees.

Although an aggrieved business would not be able to use the DTSA to prevent a former employee's movement to, or choice of, new employment, the DTSA would provide immunity to whistleblowers who reveal a businesses' trade secrets to the government as part of any violations they report. However, an employer would be required to tell employees about this immunity in trade secret confidentiality contracts or agreements.