President Obama Signs Defend Trade Secrets Act Creating Federal Remedies for Trade Secret Misappropriation | Practical Law

President Obama Signs Defend Trade Secrets Act Creating Federal Remedies for Trade Secret Misappropriation | Practical Law

President Obama has signed the historic Defend Trade Secrets Act of 2016 (DTSA) into law, creating the first federal, civil remedy for trade secret misappropriation.

President Obama Signs Defend Trade Secrets Act Creating Federal Remedies for Trade Secret Misappropriation

by Practical Law Labor & Employment
Law stated as at 11 May 2016 • USA (National/Federal)
President Obama has signed the historic Defend Trade Secrets Act of 2016 (DTSA) into law, creating the first federal, civil remedy for trade secret misappropriation.
On May 11, 2016, President Obama signed the historic Defend Trade Secrets Act of 2016 (DTSA) into law. The DTSA amends the Economic Espionage Act of 1996 (18 U.S.C. § 1831, et seq.) creating the first private cause of action for civil trade secret misappropriation under federal law. The DTSA supplements, but does not preempt or eliminate, state trade secret law.
The DTSA incorporates many provisions of the Uniform Trade Secrets Act, which has been adopted in some form in 48 states, but provides additional remedies. For example, the DTSA:
  • Grants litigants access to federal courts in any case involving alleged theft of trade secrets, irrespective of the amount in controversy.
  • Authorizes ex parte seizure orders where it is clearly shown that injunctive relief would be inadequate.
  • Authorizes limited employment restrictions based on evidence of threatened misappropriation, if those restrictions do not interfere with applicable state law.
The DTSA also offers protection for whistleblower employees who disclose trade secrets in certain circumstances. Specifically, the DTSA:
  • Grants whistleblower immunity from criminal and civil liability to employees (defined to include individuals performing work as contractors or consultants) who disclose trade secrets to government authorities either:
    • in confidence solely to report or investigate a suspected violation of law to a federal, state, or local government official, or to an attorney; or
    • under seal in a complaint or other document filed in a lawsuit or other proceeding.
  • Allows employees who file a lawsuit for retaliation by an employer to disclose the employer's trade secret to an attorney and use the trade secret in the court proceeding, if the employee both:
    • files any document containing the trade secret under seal; and
    • does not disclose the trade secret, except pursuant to court order.
  • Requires employers to provide notice about whistleblower immunity in any agreement with employees (as defined) governing the use or disclosure of trade secrets or other confidential information that is entered into or updated after the DTSA's effective date.
However, the DTSA does not authorize or limit liability for an act that is otherwise prohibited by law, such as unlawfully accessing material by unauthorized means.
Employers should note that although there is an affirmative obligation under the statute to provide the notice, the only stated consequence for failure to provide the notice is the employer's inability to recover exemplary damages and attorneys' fees under the DTSA. Similar remedies may be available to the employer under state law.
For more information on state law remedies, see Question 14 of Trade Secret Laws: State Q&A Tool. For sample notice language, see Standard Document, Employee Confidentiality and Proprietary Rights Agreement: Notice of Immunity Under the Economic Espionage Act of 1996, as amended by the Defend Trade Secrets Act of 2016.
The DTSA became effective immediately on May 11, 2016. It only applies to trade secret misappropriation that occurs on or after the law's effective date.
For more information on the DTSA, see: