The Defend Trade Secrets Act – A Brief Overview

In Business Law by Coolidge Wall

On May 11, 2016, the Defend Trade Secrets Act (“DTSA”) became federal law. The DTSA is intended to promote uniform protection for trade secrets, not unlike federal protections afforded to trademarks, copyrights, and patents. Before the DTSA was enacted, the law of trade secrets was primarily governed by state law (many states adopted a version of the Uniform Trade Secrets Act, but standards vary from state to state). The DTSA applies to trade secret misappropriation occurring on or after May 11, 2016 provided the trade secrets are related to a product or service used in or intended for use in interstate or foreign commerce.

This blog touches on the following three major implications of the DTSA:

  1. The DTSA Has a Three-Year Statute of Limitations: The DTSA creates a three-year statute of limitations, and includes a “discovery rule” (i.e., the limitations period begins when the claimant discovers the misappropriation or should have discovered it by exercising reasonable diligence. 18 U.S.C. § 1836(d). By way of comparison, Ohio law provides a four-year statute of limitations (and includes a discovery rule). The DTSA and Ohio law both treat “a continuing misappropriation” as a single claim. Since trade secret disputes often include requests for emergency injunctive relief most parties will want to act very quickly upon learning of misappropriation.
  2. Federal Jurisdiction – Original But Not Exclusive: The DTSA creates “federal question” subject matter jurisdiction, enabling litigants to bring suit under the DTSA in federal court. Parties can still opt to litigate in an Ohio state court if they choose, but in doing so they limit themselves to Ohio trade secrets law.
  3. Whistleblower Protection for Employees and New Notice Obligations for Employers: The DTSA grants a new basis for whistleblower immunity (criminal and civil) and establishes a new private right of action for discharged whistleblowers. Whistleblowers who disclose trade secrets or other confidential information in the course of reporting a suspected violation of the DTSA to a governmental entity are immune from liability for such a disclosure. Further, the DTSA authorizes a former employee to disclose the employer’s trade secret information to his or her attorney and the court under seal in an action claiming retaliatory discharge.

The DTSA imposes a corresponding notice requirement on employers in “any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” 18 U.S.C. § 1833(b)(3)(A). For such contracts or agreements, employers must notify their employees, contractors, and consultants of the two protections referenced above. Documents existing before the DTSA’s effective date do not need to be amended to include this notice. Failure to provide the required notice may limit the remedies available to the company under the DTSA in a lawsuit to enforce its rights.

This blog should not be considered a comprehensive discussion of the DTSA, legal advice, or all that a company, employee, contractor, or consultant should consider when navigating the uncertain waters of trade secret law. Should you wish to discuss the DTSA and its implications, contact an attorney who can provide specific guidance tailored to your situation.

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