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Apr 30, 2016

The Defend Trade Secrets Act 2016: Federalizing Trade Secret Law


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Currently, no federal law provides a private right of action for trade secret misappropriation. On the federal level, the Economic Espionage Act of 1996, as amended by the Theft of Trade Secrets Clarification Act (2012), makes it a crime to knowingly misappropriate trade secrets. See 18 U.S.C. 1832(a).1

In terms of civil remedies, aggrieved trade secret owners must bring an action under state law for any misappropriation. All but three states—Massachusetts, North Carolina, and New York—have adopted some form of the Uniform Trade Secrets Act. New York and Massachusetts have bills that have been introduced this year to enact a version of the UTSA.2

 On July 29, 2015, Congressional leaders in both the House and the Senate introduced identical bills, HR 3326 and S. 1890, that would create a federal private right of action for the misappropriation of trade secrets. In January 2016, Senators Orrin Hatch and Christopher Coons presented several amendments to S. 1890. On April 4, 2016, the amended bill was unanimously passed by the Senate as the Defend Trade Secret Act of 2016 (“DTSA”), and on April 27, 2016, the bill was passed by the House in a 410-2 vote. 

 The DTSA has a number of similarities with the UTSA. For example, it provides for injunctive relief, compensatory damages (including actual loss and any unjust enrichment), and awards double damages for willful and malicious misappropriation. The DTSA also similarly defines “misappropriation” and has a three-year statute of limitations. However, unlike the UTSA, the DTSA would give trade secret owners access to federal courts. It would also provide, in extraordinary circumstances, for ex parte seizures of property “necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.” Under the bill, a court may only order such a seizure after finding that other equitable forms of relief would be inadequate, irreparable injury would result absent a seizure, the harm to the applicant outweighs the harm to the legitimate interests of the person against whom seizure would be ordered, and the applicant is likely to succeed on the merits of its trade secret misappropriation claim. The bill also requires the Attorney General to report, one year after enactment of the bill and biannually thereafter, on (i) trade secret theft from U.S. companies occurring overseas, including that which is sponsored by foreign governments and agents, and (ii) recommendations on legislative and executive action to reduce the threat of trade secret theft from U.S. companies occurring outside the U.S. 

The DTSA will now go to President Obama, who has already indicated that he “strongly supports” the bill and that it would “provide important protection to the Nation’s businesses and industries.”3


The Computer Fraud and Abuse Act is a federal statute that provides for criminal and civil actions in certain situations against anyone who intentionally accesses a computer without authorization, and thereby obtains information from a computer.