July 2016 Bar Bulletin
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July 2016 Bar Bulletin

New Federal Trade Secret Law Adds Protections

By Karen Sutherland

 

If you’re looking for added protection for your star-quality trade secrets, Congress recently recognized that:

(1) trade secret theft occurs in the United States and around the world;

(2) trade secret theft, wherever it occurs, harms the companies that own the trade secrets and the employees of the companies;

(3) chapter 90 of title 18, United States Code (commonly known as the “Economic Espionage Act of 1996”), applies broadly to protect trade secrets from theft; and

(4) it is important when seizing information to balance the need to prevent or remedy misappropriation with the need to avoid interrupting the—

(A) business of third parties; and

(B) legitimate interests of the party accused of wrongdoing.

With those concepts in mind, the Defend Trade Secrets Act of 20161 was enacted on May 11.

Civil Seizure of Misappropriated Trade Secrets

The Act allows employers to bring a civil action and, in extraordinary circumstances, to obtain a civil seizure order ex parte against their employees, contractors and consultants “for the seizure of property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.”

The seizure order is “accompanied by an order protecting the seized property from disclosure by prohibiting access by the applicant or the person against whom the order is directed, and prohibiting any copies, in whole or in part, of the seized property, to prevent undue damage to the party against whom the order has issued or others, until such parties have an opportunity to be heard in court,” and places conditions on the granting of access to the seized property. A hearing on the seizure must be held no more than seven days after the seizure.

Protection against Publicity

The Act also protects the person against whom the seizure order is entered from publicity by the person who obtained the order. It provides: “The court shall take appropriate action to protect the person against whom an order under this paragraph is directed from publicity, by or at the behest of the person obtaining the order, about such order and any seizure under such order.”

Remedies

The remedies available to employers include an injunction preventing actual or threatened misappropriation of the trade secret, possible payment of royalties, and damages, including double damages and attorney’s fees if the misappropriation is willful and malicious.


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