The Defend Trade Secrets Act of 2016 creates a federal cause of action for trade secret misappropriation.
The Act became law on May 11, 2016.
This law presents an additional recourse for Maryland trade secret owners who already may bring an action under the Maryland Uniform Trade Secrets Act (“MUTSA”).
Under the Defend Trade Secrets Act of 2016, an owner of a trade secret that is misappropriated may bring an action in federal court if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.
This law provides a more aggressive remedy than MUTSA in that a court may issue an order providing for the seizure of property necessary to prevent the propagation or dissemination of the trade secret.
Such an order may only be issued based on an affidavit or verified complaint, filed in an ex parte application and in extraordinary circumstances. Moreover, the court may not order such a seizure unless it finds that a preliminary injunction or temporary restraining order would be inadequate.
Unlike a preliminary injunction or temporary restraining order, such a seizure by law enforcement is allowed without any prior notice to the defendant.
Remedies allowed by the law include actual damages and unjust enrichment – if not already included in actual damages. Additionally, in lieu of damages measured by any other method, the Court may award damages measured by a reasonable royalty for the unauthorized disclosure or use of the trade secret.
If the trade secret was willfully and maliciously misappropriated, the Court can award exemplary damages of not more than two times the amount of actual damages, plus attorneys’ fees. Attorneys’ fees can also be awarded to a defendant if the claim was brought in bad faith.
The new law provides that the disclosure of a trade secret in confidence to an attorney or government official solely for the purpose of reporting a suspected violation, or made in a lawsuit under seal, is not subject to civil liability.
Additionally, if an employee or former employee brings a retaliation lawsuit against an employer for reporting a suspected violation of law, the employee may disclose the trade secret to their attorney and use the trade secret information in the lawsuit, provided documents containing the trade secret are filed under seal and the employee does not disclose the trade secret, except pursuant to court order.
Finally, an employer must provide notice of the above immunities in any trade secret or confidentiality contract or agreement with an employee, contractor or consultant. Alternatively, the employer may provide a cross-reference to a policy document provided to the employee, contractor or consultant that sets forth the employer’s reporting policy for a suspected violation of law.
If an employer does not comply with the immunity notice requirement in its contracts or agreements, the employer may not be awarded exemplary damages or attorney fees in an action against an employee to whom notice was not provided.
Contact Luchansky Millman today to ensure that your trade secret and confidentiality contracts and agreements are in compliance with the new Federal Trade Secrets Law.