The Defend Trade Secrets Act (DTSA) is a federal law enacted in 2016 that allows businesses to bring civil lawsuits in federal court for trade secret misappropriation. Importantly, the DTSA supplements rather than replaces state trade secret laws. This means that while companies now have access to federal courts, they can also pursue remedies under state laws, such as those modeled after the Uniform Trade Secrets Act (UTSA). The DTSA was a significant development in intellectual property law because it provided consistent, nationwide legal standards and enforcement mechanisms, whereas prior to its enactment, trade secret protection varied significantly by state.
Under the DTSA, a trade secret is broadly defined to include any type of confidential business information—such as formulas, practices, processes, designs, software code, customer lists, or business strategies—that derives independent economic value from not being generally known and for which the owner has taken reasonable measures to maintain secrecy. The DTSA adopts this definition from the Economic Espionage Act of 1996 (EEA), and it applies specifically to trade secrets that are used in, or intended for use in, interstate or foreign commerce.
The DTSA defines misappropriation to include both the improper acquisition of trade secrets and the unauthorized use or disclosure of those secrets. Acquisition is considered improper when it involves acts like theft, bribery, or breaches of confidentiality agreements. Even if a person lawfully acquires a trade secret, their use or disclosure of that information may still constitute misappropriation if it violates contractual or legal obligations.
The remedies available under the DTSA are robust. Plaintiffs may seek injunctive relief to stop further use or dissemination of the trade secrets and may also recover monetary damages. These damages can include compensation for actual losses suffered due to the misappropriation, as well as for unjust enrichment obtained by the defendant. In cases where the misappropriation is found to be willful and malicious, courts may award exemplary damages up to two times the amount of actual damages. Additionally, the prevailing party may recover attorney’s fees in certain situations, such as when the other party has acted in bad faith.
One of the unique features of the DTSA is its provision for ex parte seizure. In extraordinary circumstances, a court can order the seizure of property (such as computers, documents, or other media) without prior notice to the defendant. This remedy is intended to prevent the further spread or loss of trade secrets, particularly when traditional injunctive relief would be insufficient. However, courts apply this remedy sparingly and require a high standard of proof, as it can be intrusive and potentially disruptive.
The DTSA also includes a significant whistleblower immunity provision. Individuals are granted immunity from liability under federal and state trade secret law when they disclose trade secrets in confidence to a government official or attorney for the purpose of reporting or investigating a suspected legal violation. To enforce this provision, the DTSA requires employers to inform employees, contractors, and consultants of this immunity in employment or confidentiality agreements. Failure to do so can prevent the employer from recovering exemplary damages and attorney’s fees under the DTSA.
In summary, the DTSA is a powerful tool that strengthens the protection of trade secrets at the federal level. It offers consistent legal standards, enhances enforcement capabilities, and includes innovative legal remedies such as ex parte seizure and whistleblower immunity. However, it is important to remember that the DTSA coexists with state laws, and most trade secret litigation will still involve strategic considerations about pursuing claims under both state and federal law.