Defend Trade Secrets Act of 2016

The House and Senate passed the Defend Trade Secrets Act of 2016 effective April 27, 2016. (S. 1890). President Obama signed it into law on May 11, 2016.

Trade secrets have previously been protected by state laws in the U.S. This bill amends the Economic Espionage Act of 1996 to permit a private federal civil action for misappropriation of a trade secret that is "related to a product or service used in, or intended for use in, interstate or foreign commerce."

Through this law, parties may now bring an action for trade secret misappropriation in federal court. Remedies may include injunction, damages, restitution, ex parte seizure, exemplary damages and attorneys' fees.

• The bill allows for seizure of property as necessary to prevent "propagation or dissemination" of the trade secret.

• In a hearing, the Court may
• Grant an injunction as appropriate to prevent misappropriation
• Award damages for actual losses
• Award damages for unjust enrichment caused by the misappropriation (no duplicative recovery)

 or

• Grant a reasonable royalty in lieu of damages

• In addition, if the trade secret is "willfully and maliciously misappropriated," the Court may award exemplary damages - not more than 2x the amount of damages awarded.

• The court may award reasonable attorney's fees to the prevailing party in certain circumstances.

This federal right of action does not supersede state actions, but it gives claimants an additional venue.

IMMUNITY

An individual may not be held liable for disclosure of a trade secret that (A) is made (i) in confidence to a government official, directly or indirectly, or to an attorney, and (ii) solely for the purpose of reporting or investigating a suspected violation of the law, or (B) is made in a complaint or other document filed in a lawsuit or other proceeding if the filing is made under seal.

An individual who files a whistleblower lawsuit made disclose the trade secret to his/her attorney and use the information in the court proceeding if the individual (A) files the trade secret information under seal, and (B) does not disclose the trade secret except pursuant to a court order.

EMPLOYERS BEWARE

An employer shall provide notice of the immunity (above) in any contract or agreement with an employee that governs the use of a trade secret or other confidential information. The notice may be provided by referencing a "policy document" provided to the employee that sets forth the employer's reporting policy for a suspected violation of the law.

If an employer doesn't comply with the notice requirements, the employer may not be granted exemplary damages or attorneys' fees in an action against an attorney who didn't get notice.

The notice provisions all to contracts and agreements entered into or updated after the enactment of this subsection.

Any organization that intentionally uses another' trade secret related to a product or service intended for use in interstate U.S. or foreign commerce for the economic benefit of anyone other than the owner of the trade secret and who intends to, or knows that, the owner will be injured, shall be fined the greater of $5million USD or 3x the value of the stolen trade secret (including research and design and trade secret reproduction expenses).

Trade secret theft may be utilized to bring a RICO action.

The owner of a trade secret may bring a civil, federal cause of action within 3 years of learning of the misappropriation (or when such owner should have known).