Federal Trade Secret Act Moves Forward

The Senate, this week, passed the Defend Trade Secrets Act (DTSA), sponsored by Senators Orrin Hatch and Chris Coons. This new law would open the federal courts to trade secrets litigation.

The new Trade Secrets bill provides remedies for trade secret misappropriation, including injunctive relief, compensatory damages, punitive damages, and attorneys' fees (in the event of willful or malicious misappropriation). It also allows plaintiffs to seek ex parte government seizure of trade secrets to preserve evidence before notifying the defendant of a lawsuit; but, the new Senate bill now states that this is only permitted in "extraordinary circumstances."

Trade secrets are now protected under state law: 48 states have adopted some form of theUniform Trade Secrets Act, which was published by the Uniform Law Commission in 1979 and amended in 1985.  Only New York and Massachusetts have not adopted the UTSA.

The proposed new federal law allows pre-suit seizure, unlike the uniform act. Its statute of limitations period is now also three years (a former version had five years) and it allows for the recovery of treble exemplary damages versus double under the uniform act.  The new federal law does not contain language preempting other causes of action that arise under the same common nucleus of facts.

Is a federal law needed? Would it encourage or confuse uniformity in trade secrets law? Would it discourage labor mobility? Will it help quell industrial espionage, especially from foreign sources? Can a "trade secret" be defined adequately? These issues present challenges to developing new statutory schemes in trade secrets.