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Defend Trade Secrets Act of 2016 (DTSA)
Practical Law Glossary Item w-002-2095 (Approx. 4 pages)
Glossary
Defend Trade Secrets Act of 2016 (DTSA)
An amendment to the Economic Espionage Act (EEA) (18 U.S.C. § 1831, et seq.) that creates a federal private cause of action for trade secret misappropriation. The Defend Trade Secrets Act of 2016 (DTSA), passed by Congress in April 2016 and effective May 11, 2016, authorizes a trade secret owner to file a civil action in federal district court seeking relief for trade secret misappropriation related to a product or service used in or intended for use in interstate or foreign commerce (18 U.S.C. § 1836(b)). The EEA, as amended by the DTSA, defines trade secrets and misappropriation consistent with the Uniform Trade Secrets Act (UTSA), which has been adopted in some form by all states (except New York) and the District of Columbia (18 U.S.C. § 1839). Available remedies under the DTSA include:
- An injunction to preserve evidence and prevent trade secret disclosure, provided that it does not:
- prevent a person from entering into an employment relationship, and that conditions placed on such employment are based on evidence of threatened misappropriation and not merely on the information the person knows; or
- otherwise conflict with an applicable state law prohibiting restraints on the practice of a lawful profession, trade, or business.
- Damages measured by:
- actual loss and unjust enrichment, to the extent not accounted for in actual loss calculation; or
- a reasonable royalty for the unauthorized disclosure or use of the trade secret.
- Exemplary damages up to two times the amount of the damages for willful and malicious misappropriation.
- Reasonable attorneys' fees for the prevailing party if:
- the misappropriation claim is made in bad faith;
- a motion to terminate an injunction is made or opposed in bad faith; or
- the trade secret was willfully and maliciously misappropriated.
Unlike the UTSA, the DTSA allows a trade secret owner to seek an ex parte seizure order to prevent dissemination of the trade secret, and includes specific provisions designed to prevent abuse of the seizure authority (18 U.S.C. § 1836(b)(2)). For more on DTSA seizure orders, see Article, Expert Q&A on DTSA Seizure Orders.
The DTSA provides criminal and civil immunity under federal and state law for employees, consultants, and contractors who make disclosures to government authorities or attorneys regarding a suspected violation of law or in a complaint or other court filing made under seal. Employers must notify these individuals about the DTSA whistleblower immunity in any contract regarding the use of trade secrets or confidential information entered into or modified after the effective date of the DTSA. Employers that fail to provide notice forfeit the right to recover attorneys' fees and exemplary damages against those individuals. (18 U.S.C. § 1833(b).)
For sample DTSA immunity language, see Standard Clause, Notice of Immunity Under the Defend Trade Secrets Act (DTSA) Provision.
The statute of limitations for a claim under the DTSA is three years from the date of discovery of the misappropriation (18 U.S.C. § 1836(d)).
Until the DTSA, trade secret misappropriation was governed by state law. The DTSA supplements but does not preempt state law (18 U.S.C. § 1836(f)).
For more on the DTSA, see Practice Note, Employment Litigation: DTSA Claims and Defend Trade Secrets Act (DTSA) Issues and Remedies Checklist.