On July 29, 2015, with bipartisan support, congressional leaders in both the House and Senate, including Senator Orrin Hatch (R-UT) and Representative Doug Collins (R-GA), introduced a bill to create a federal private right of action for the misappropriation of trade secrets. The proposed legislation, titled the “Defend Trade Secrets Act of 2015” (“DTSA”), follows a failed attempt just last year to pass the “Defend Trade Secrets Act of 2014.”
Announcement of the proposed legislation was joined by a letter of support on behalf of the Association of Global Automakers, Inc., Biotechnology Industry Organization (BIO), The Boeing Company, Boston Scientific, BSA | The Software Alliance (BSA), Caterpillar Inc., Corning Incorporated, Eli Lilly and Company, General Electric, Honda, IBM, Illinois Tool Works Inc., Intel, International Fragrance Association, North America, Johnson & Johnson, Medtronic, Micron, National Alliance for Jobs and Innovation (NAJI), National Association of Manufacturers (NAM), NIKE, The Procter & Gamble Company, Siemens Corporation, Software & Information Industry Association (SIIA), U.S. Chamber of Commerce, United Technologies Corporation and 3M. The joint letter expressed the need for a private right of action to supplement the existing Economic Espionage Act of 1996 (“EEA”), which only provides for criminal sanctions in the event of trade secret misappropriation.
If passed, the proposed DTSA will grant a private right of action for misappropriation of trade secrets under federal law. The DTSA is largely consistent with the Uniform Trade Secrets Act (“UTSA”), which has been passed in some form in almost all states. The DTSA defines “misappropriation” consistently with the DTSA, and provides for similar remedies, including injunctive relief, compensatory damages, and exemplary damages and the recovery of attorneys’ fees in the event of willful or malicious misappropriation.
The DTSA differs from the UTSA in several important aspects. First, the DTSA allows for an ex parte seizure order. A plaintiff fearful of the destruction or hiding of its trade secrets would be able to take proactive steps to recover its trade secrets prior to giving any notice of a lawsuit. The proposed seizure protection goes well beyond what a court is typically willing to order under existing state law. Second, the DTSA’s limitations period is five years compared to just three under the UTSA. Third, the DTSA allows for the recovery of treble exemplary damages versus double under the UTSA. Fourth, the DTSA contains no language preempting other causes of action that arise under the same common nucleus of facts, unlike the UTSA. Finally, the DTSA allows for federal jurisdiction of a misappropriation claim, provided the plaintiff can demonstrate a connection between the trade secret and interstate commerce. In sum, the DTSA provides significant measures for a plaintiff compared to the UTSA.
The DTSA offers significant protections to trade secret holders and will create a uniform legal framework across the United States. Now, all stakeholders will need to wait and see whether the DTSA of 2015 is able to become law where prior legislative efforts failed.