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Congress Passes Federal Defend Trade Secrets Act

Trade Secrets and Unfair Competition

Action Item: President Barack Obama is expected to sign a new law that will provide companies with a federal cause of action for trade secret protection claims. The Defend Trade Secrets Act of 2016 (“DTSA”) passed Congress last week with overwhelming bipartisan support and will become effective immediately upon the President’s signature.

The DTSA recognizes the growing importance of corporate trade secrets in the United States economy and provides businesses with another powerful tool to confront the growing problem of economic espionage and trade secret theft through downloading and hacking of electronic information. While existing state laws and common law rights already provide a measure of trade secret protection, the level of protection is far from uniform and depends greatly on varying state court interpretations of what is a trade secret and what is unlawful misappropriation of trade secrets. The DTSA is expected to provide for the first time a uniform federal standard for trade secret protection.

Here is the good news for companies that rely on trade secret protection:

  • Companies will be able to sue in federal court with available federal remedies including injunctive relief and enhanced damages;
  • In special circumstances, companies may be able to obtain ex parte orders to seize the stolen trade secrets to avoid use and disclosure; and
  • Companies can still bring state law claims where state laws provide greater trade secret protection or broader remedies that those offered by the DTSA.

BUT, there is a catch. The DTSA protects whistleblowers who disclose information in confidence to government officials or private attorneys for the purpose of reporting suspected legal violations. The new law also requires companies to “provide notice of the immunity...in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” Companies must revise their employee confidentiality agreements and confidentiality policies to include notice of this whistleblower immunity.

In you have any questions about the new federal Defend Trade Secrets Act or would like further information on how the law may impact your company, please contact Anthony Haller, Michael Broadhurst, Leigh Ann Buziak, Kevin Passerini, Gus Sandstrom, or any member of Blank Rome LLP’s Trade Secret Protection team.

© 2016 Blank Rome LLP. All rights reserved. Please contact Blank Rome for permission to reprint. Notice: The purpose of this update is to identify select developments that may be of interest to readers. The information contained herein is abridged and summarized from various sources, the accuracy and completeness of which cannot be assured. This update should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.