BFV Perspectives, Corporate Matters, Noncompete & Trade Secrets, | Apr 19, 2016

Quick Thoughts on the Defend Trade Secrets Act

The Defend Trade Secrets Act unanimously passed the Senate a few weeks ago. The DTSA has now been referred to the House Judiciary Committee.  The bill has significant support in the House of Representatives.  It thus appears a federal trade secret law is finally on the horizon.

The following are a few quick thoughts and observations regarding the version of the DTSA passed by the Senate:

  1. One goal of the DTSA is to create uniform trade secret law.  To address concerns some raised regarding the potential impact of the DTSA on employee mobility, the DTSA was amended to provide that an injunction must not conflict with an applicable state law prohibiting restraints on the practice of a lawful profession, trade, or business.  This language poses the possibility that federal courts in different districts could, at least in some circumstances, apply the DTSA differently based on the non-compete law of the state in which the court sits.
  2. It may be time to revise your non-disclosure agreements!  The provisions that provide for immunity from liability for trade secret theft for whistleblowers provide that employers must notify their employees of these immunities in any contract or agreement that governs the use of a trade secret or other confidential information. An employer who fails to comply with this notice requirement may not recover exemplary damages or attorney fees.  If the DTSA becomes law, many employers may need to update their non-disclosure covenants.
  3. While I anticipate that judges may not frequently issue ex parte seizure orders, when they do they will need to have law enforcement officers available who are very well versed in forensics.
  4. The DTSA provides that the court may allow a technical expert to assist law enforcement officers in executing an ex parte seizure.  The technical expert must not be affiliated with the plaintiff.  The DTSA does not address who pays for the technical expert’s services.  It would be logical for the court to be authorized to order that the plaintiff bears the costs, subject to the plaintiff’s right to seek to recover those costs from the defendant as part of the lawsuit.

I welcome any thoughts and comments on these issues or any other issues regarding the DTSA.

BFV Perspectives, Corporate Matters, Noncompete & Trade Secrets, | Apr 19, 2016
Neal F. Weinrich
Neal F. Weinrich

Neal Weinrich knows noncompetes and trade secrets inside and out. A shareholder at Berman Fink Van Horn, Neal counsels clients in all industries on matters involving restrictive covenants, trade secrets and other competition-related issues.