Obama Signs Law Boosting Federal Trade Secret Protections

NEWS ANALYSIS: Trade secret protections have been around for a long time, but the new Protect Trade Secrets Act provides a wider path to federal court.

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President Barack Obama signed a new federal law on May 11 that's designed to help the nation protect its intellectual property by giving the federal courts broader jurisdiction in civil cases involving the loss of trade secrets.

The new law, titled the "Defend Trade Secrets Act of 2016" also adds some new powers to the federal government and it provides some protections for individuals in dealing with trade secrets.

The primary goal of the DTSA is to give the federal courts original jurisdiction over cases involving the theft or loss of trade secrets. This means that a company can bring suit in federal court to recover losses, and in some cases, it can request an order from the court that the trade secret be seized from those who misappropriated them. The act covers both intentional theft as well as accidental loss of a trade secret.

There's also a recent addition to the DTSA that provides protection for whistleblowers who pass a trade secret along to the government or to their counsel. This means that an employee or contractor can provide a trade secret to regulators if necessary to prove wrongdoing.

As a part of the whistleblower protection, companies are now required to include the wording about whistleblower protections in their employee or contractor agreements if trade secrets will be involved.

As the law is written, the new protections are only required in new or updated agreements. Theoretically, employees or contractors covered under agreements signed before the DTSA took effect aren't covered by those protections.

Previously, trade secrets were covered by state laws and most lawsuits involving them were filed in state courts, although existing law already allowed companies and individuals to file trade secret lawsuits in federal court. The difference is that the federal law provides some consistency to trade secret rules for companies that operate in more than one state and they add protections for companies in states such as New York and Massachusetts that have no trade secret laws.

The DTSA also adds the seizure remedy, which wasn't available under previous laws. According to Robert Milligan, a partner in the law firm Seyfarth Shaw, the ex parte seizures could be invoked when the plaintiff in a trade secret case could show that there was a chance that the trade secret would be destroyed or taken out of the United States. In such a case, the defendant wouldn't find out about the trade secret suit until federal marshals showed up to seize the secret in question.

"This provides a property right under federal law," Milligan said. He noted that there are provisions in the law to protect against abuse of the seizure provisions, including the ability of the entity who suffered the seizure to recover costs if the action had been brought in bad faith.

Wayne Rash

Wayne Rash

Wayne Rash is a freelance writer and editor with a 35 year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He covers Washington and...