Intellectual property (IP) is the heart of most businesses, the one thing they will go to great lengths to protect. Toward that end, the Defend Trade Secrets Act of 2016 (Public Law No: 114-153) became effective.
This bill amends the federal criminal code to create a private civil cause of action for trade secret misappropriation.
A trade secret owner may file a civil action in a U.S. district court seeking relief for trade secret misappropriation related to a product or service in interstate or foreign commerce. The bill establishes remedies including injunctive relief, compensatory damages, and attorney’s fees. It sets a three-year statute of limitation from the date of discovery of the misappropriation.
A trade secret owner may apply for “in extraordinary circumstances” an ex parte seizure order to prevent dissemination of a trade secret if the court makes specific findings that (1) a temporary restraining order or another form of equitable relief is inadequate, (2) an immediate and irreparable injury will occur if seizure is not ordered, and (3) the person against whom seizure would be ordered has actual possession of the trade secret and any property to be seized.
The bill increases the maximum penalty for trade secret theft (currently $5 million) to the greater of $5 million or three times the value of the stolen trade secret.
A court may not authorize or require the disclosure of information that an owner asserts to be a trade secret unless the court allows the owner to submit under seal, which is the process of filing sensitive or confidential information with a court without it becoming a matter of public record).
a description of the interest in keeping the information confidential. Additionally, disclosure of information related to a trade secret in connection with a prosecution does not constitute a waiver of trade secret protection unless an owner expressly consents to such waiver.
The Federal Judicial Center must develop, update, and submit to Congress best practices for seizing information and securing seized information.
The bill provides immunity from civil and criminal liability for an individual who discloses a trade secret: (1) to a government official or attorney in confidence to report or investigate a violation of law, or (2) in a legal complaint or filing under seal.
This should be good news for small businesses where their trade secrets and other IP is what makes them unique. The intent is to put stronger laws in place to safeguard this type of information. However, the private sector believes that this will lead to a significant increase in trade secret lawsuits that may put a financial strain on the very businesses it was intended to protect.
Stay tuned. I’m sure there will be more to come on this topic.
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