The DTSA Gives Trade Secret Owners A Powerful New Tool

The DTSA Gives Trade Secret Owners A Powerful New Tool

Until May of 2016, the law governing civil trade secret misappropriation was primarily state-based.  Florida’s Uniform Trade Secrets Act gave owners of trade secrets the ability to seek injunctive relief for misappropriation, and compensation for damages.  In a typical misappropriation case, the owner would file a complaint in state court and move for a temporary injunction to prevent further misappropriation during the pendency of the lawsuit.  On May 11, 2016, however, the federal Defend Trade Secrets Act (“DTSA”) was signed into law.  This Act creates a federal cause of action for trade secret misappropriation, and it provides a powerful new remedy to owners—ex parte civil seizure.

The DTSA’s civil seizure provisions allow the owner of a trade secret to file an ex parte application in federal court and secure an order providing for the seizure of property necessary to prevent the propagation or dissemination of a trade secret.  This remedy gives the owner of a trade secret the ability to obtain a court order directing law enforcement officials to seize property and deposit it with the court—without prior notification to the alleged misappropriator.  The court then secures the trade secret from physical and electronic access until a hearing can be held on the matter.

Civil seizure may only be used in extraordinary circumstances, and an applicant must establish elements above and beyond those necessary to secure a preliminary injunction or temporary restraining order.  Indeed, an applicant must establish that injunctive relief pursuant to Rule 65 would be inadequate, that the applicant will suffer immediate irreparable harm without civil seizure, a likelihood of establishing misappropriation, and that the alleged misappropriator is in actual possession of the trade secret(s).  The applicant must also identify what is to be seized, where it is located, and refrain from publicizing the requested seizure.  Further, the applicant must establish that the potential harm it faces outweighs the potential harm to the alleged misappropriator, and substantially outweighs the potential harm to any third parties.  Finally, the applicant must establish that the person against whom seizure would be ordered would destroy, move, hide, or otherwise make the trade secret inaccessible if the misappropriator were given prior notice of the action.  While not impossible, establishing these elements is a substantial undertaking.

In addition, seeking civil seizure under the DTSA involves some degree of risk—the owner of a trade secret who engages in “wrongful or excessive” seizure can be held liable for damages, including punitive damages and attorneys’ fees, by the person against whom seizure was sought.  This provision is meant to balance the use of the remedy and prevent its abuse.  But in many circumstances, the risk is well worth the reward.

The civil seizure remedy gives the owner of a trade secret the ability to respond to misappropriation in a way that would not be possible with a preliminary injunction or temporary restraining order.  Particularly in extreme cases like those involving corporate or industrial espionage, civil seizure could prove highly effective at physically preventing transmission of trade secrets to competitors.  And even for the smallest companies or individual trade secret owners, this remedy is a valuable option in the unfortunate situations in which its use is needed—like with the unexpected departure of a key employee.   The DTSA’s civil seizure remedy is a powerful tool that every business and trade secret owner should be aware of—but hopefully will never need.

Contact Andrew M. Spencer at aspencer@clarkpartington.com or by phone, 850-434-9200.

 

This publication should not be construed as legal advice.  Its applicability is dependent upon specific facts and circumstances and is provided for informational purposes only.  You should not act upon this information without seeking advice from a lawyer licensed in your own state.