What are the Basics of the Defend Trade Secrets Act?

President Obama signed the Defend Trade Secrets Act (“DTSA”) that protects intellectual property, specifically trade secrets, against misappropriation. The DTSA expands protection available under the Economic Espionage Act of 1996 (“EEA”).

Misappropriation of Trade Secrets

Misappropriation of trade secrets refers to the acquisition of a trade secret by improper means. Misappropriation of a trade secret may also refer to the improper disclosure or use of a trade secret of a third party without the express or implied consent of the owner of the trade secret. Under the DTSA, misappropriation includes: without permission (a) obtaining a trade secret that was knowingly obtained through improper means or (b) disclosing or using a trade secret without knowing either (1) that it is a trade secret or (2) that it was obtained through “improper means.” The DTSA defines “improper means” as “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means.” Noteworthy is the fact that the DTSA does not consider “reverse engineering, independent derivation, or any other lawful means of acquisition” to be misappropriation. This stance is consistent with EEA existing law that allows for such acquisition to potentially be defenses.

Federal Jurisdiction for the Defend Trade Secrets Act

The DTSA provides the basis for federal jurisdiction under the Commerce Clause of the Constitution. As such, federal courts can have jurisdiction over claims of misappropriation of trade secrets as long as they are related to a product or service intended for use in interstate commerce.

Moreover, the DTSA’s definition of trade secret is generally broader than state definitions. The DTSA defines trade secrets as “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if —(a) the owner thereof has taken reasonable measures to keep such information secret; and (b) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by another person who can obtain economic value from the disclosure or use of the information.”

Lastly, the DTSA allows for ex parte seizures, which allows plaintiffs to ask the government to seize trade secrets that have been misappropriated without having to provide notice to the defendants in advance. There are no similar remedies available under state laws.

Hiring a Trade Secrets Attorney

Misappropriation of a trade secret can seriously jeopardize a company’s revenue and future. In order to utilize the newly enacted DTSA, plaintiffs should seek experienced intellectual property counsel to aid them in misappropriation litigation.

Our IP litigation team handles a broad range of intellectual property (IP) litigation cases, including:

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Klemchuk PLLC is a leading intellectual property law firm focusing on litigation, anti-counterfeiting, trademarks, patents, and business law. We help clients protect innovation and increase market share through investments in IP.

This article has been provided for informational purposes only and is not intended and should not be construed to constitute legal advice. Please consult your attorneys in connection with any fact-specific situation under federal law and the applicable state or local laws that may impose additional obligations on you and your company. © 2023 Klemchuk PLLC