Defend Trade Secrets Act Clears United States Senate Judiciary Committee

The Defend Trade Secrets Act (“DTSA”) has cleared the Senate Judiciary Committee with broad bipartisan support. Currently, state law governs civil claims for trade secret misappropriation, generally under a particular state’s version of the Uniform Trade Secrets Act (“UTSA”), the application of which has been called “anything but uniform.”

As amended, the DTSA would not preempt state trade secrets law, but would provide for the first time a federal cause of action for trade secret misappropriation and a unified body of federal law.  Here are the most recently approved amendments:

The DTSA adopts the UTSA definition of a trade secret, requiring that the trade secret information not be known or readily ascertainable by “persons who can obtain economic value from its disclosure or use.”

Also similar to the UTSA, the DTSA imposes a three-year statute of limitations and permits punitive damages of double the compensatory damages.

Over concerns of abuse, the recent amendments provide that ex parte seizure will only be available in “extraordinary circumstances,” and that the seizure target must be in “actual” possession of the relevant property.

The DTSA requires proof of “actual or threatened misappropriation” for an injunction to issue, and, considering the ability of an employee to change jobs, the DTSA only allows an injunction that would not “prevent a person from entering into an employment relationship.”

The DTSA provides a safe harbor to whistleblowers who disclose trade secrets either in confidence to government officials, or in a lawsuit alleging retaliation by an employer.

It is unclear when the DTSA might be presented to the Senate for a floor vote, but its passage there might help move a similar version of the bill in the House out of subcommittee.  However, given the bipartisan support of the DTSA, many predict the DTSA soon will be enacted.