Trending Video: Trade secret litigation after the Defend Trade Secrets Act
I'm Peter Brody, an IP litigation partner, based in Ropes & Gray’s Washington, D.C. office. In this video, I'm going to discuss the Defend Trade Secrets Act and how it has changed the trade secret litigation landscape since it was signed into law a few years ago.
Defend Trade Secrets Act overview
The Defend Trade Secrets Act, or DTSA, is the first-ever federal, private civil cause of action for trade secret misappropriation. Before DTSA, there was a federal criminal trade secret law and there were state trade secret laws in all 50 states and the District of Columbia. Those state trade secret laws are still in effect, they were not supplanted by the DTSA, but now companies can bring lawsuits in federal court under a uniform, nationwide statute. The DTSA replicates many aspects of preexisting state trade secret laws, but it also contains certain enhancements and innovations. Predictably, there has been a substantial increase in trade secret case filings since the DTSA was enacted, and that trend appears to be continuing.
DTSA vs. state law
One of the most important innovations under the DTSA is the set of provisions that allow courts on application by the plaintiff to issue an ex parte seizure order. The trade secret owner applies for the ex parte seizure at the very beginning of the case and the burden of proof is very demanding – the trade secret owner has to show that the person to whom the seizure order is directed is likely to flee the jurisdiction if given notice or is likely to destroy evidence. Given that high standard of proof, it’s perhaps not surprising that only a handful of courts have granted applications for ex parte seizure orders, and usually only when the facts are particularly egregious.
Trade secret litigation worldwide
There is a growing recognition of the need for a uniform approach to addressing trade secret misappropriation in light of the global nature of today’s technology in business. The DTSA is one important example of that, but around the same time as the DTSA was enacted in 2016, the European Union also adopted the EU Directive on Trade Secrets to create a unified approach to trade secrets in Europe. This essentially creates a baseline minimum level of protection, which each member state in the EU is obligated to implement into its national laws. One interesting aspect of this is that it generally gives employees more freedom to bring knowledge and experience to their next employer than they had before, and the DTSA and the EU Directive both contain protection for whistleblowers.
Separately, there has also been a rise in litigation of trade secrets at the International Trade Commission since a landmark decision by the Federal Circuit in 2011 clarified the ITC’s authority to hear trade secret cases. The ITC is a quasi-judicial agency tasked with protecting U.S. industries from injuries caused by unfair acts in the importation of goods to the United States. The ITC is a fast way to get a powerful exclusionary remedy. In the 2011 case, the Court of Appeals held that the ITC can issue exclusion orders banning importation of goods resulting from misappropriation of trade secrets, even when the misappropriation takes place entirely abroad, and even when the local laws of the country where that misappropriation takes place don’t prohibit the conduct at issue.
I think it’s fair to say that we’re going to see more and more cases brought under the DTSA and the case law under the DTSA is going to continue to evolve. At this point, there have been only a few Court of Appeals decisions interpreting the statute, and that will increase. There will also be a need to reconcile competing standards with the coexistence of both state and federal trade secret laws as well as laws respecting employee mobility. The use of the ITC for trade secret cases is a recent phenomenon and case law there will also continue to evolve. There are also interesting new trade secret cases involving emerging technologies like blockchain, CRISPR and artificial intelligence. In short, watch this space.