The Defend Trade Secrets Act of 2016 aims to modernize and strengthen trade secret law.
The most significant trade secret reform in decades is about to become law. The Defend Trade Secrets Act of 2016 (DTSA) will modernize and strengthen trade secret law and address a number of issues that trade secret owners commonly encountered under current laws that were previously based solely on state law.
In April, DTSA sailed through the US Congress with overwhelming bipartisan support and only two votes of opposition, a rare accomplishment. On April 27, the US House of Representatives passed DTSA by a vote of 410 to 2. Earlier in the month, on April 4, the US Senate unanimously approved DTSA by a vote of 87 to 0. DTSA was unanimously approved by voice votes in the US Senate Committee on the Judiciary on January 28 and by the US House Committee on the Judiciary on April 20.
DTSA is expected to be signed into law in early May. Under the US Constitution’s Presentment Clause, the president has 10 days to sign or veto legislation.  Given the broad, bipartisan support for DTSA and a prior statement of support by the Obama Administration, the law is expected to be enacted shortly.
During the debate, Congress recognized the important role of trade secrets to the US economy and national security. Trade secrets touch nearly every sector of the economy, including the technology, financial institution, health, manufacturing, automobile, agriculture, and military industries, among many others. Trade secrets can include commercial information, such as “financial, business, scientific, technical, economic, or engineering information.” Some trade secret examples include prototypes, plans, processes, codes, designs, methods, and techniques.
Currently, 47 states have enacted some form of the Uniform Trade Secrets Act (UTSA). These state-based remedies may be effective for the misappropriation of a local trade secret. However, under state law, efforts to obtain remedies for stolen trade secrets taken to other jurisdictions can be cumbersome, costly, and ineffective. For example, the process to obtain a deposition of a witness in another state can require multiple court orders and delay. Instead, in federal court, parties have nationwide subpoena service power.
DTSA preserves the option for a trade secret owner to use state law remedies or to select the new federal remedies. It modernizes and enhances trade secret protection laws and provides more uniform protection for trade secret owners. Additionally, DTSA amends the Economic Espionage Act of 1996 (EEA), which provides for federal criminal penalties for trade secret misappropriation and foreign economic espionage and adds new federal civil protections.
Some of the legislation’s key features include the following:
The federal court process would be more efficient and effective to obtain witness depositions and discovery, particularly when a trade secret has already been or may be transported across state lines. Federal civil remedies are already available for other forms of intellectual property, including copyrights, trademarks, and patents. The legislation provides the same federal options for trade secrets.
The ex parte seizure order is subject to several restrictions, including requirements that (1) there be no other adequate equitable relief available, (2) the court has determined that the applicant is likely to be able to show that the target of the seizure misappropriated and has “actual possession” of the trade secret, and (3) the trade secret is in danger of being destroyed or removed.
DTSA provides protections to the target of a seizure order, including requirements that the court be responsible for keeping a trade secret confidential after it has been seized; the court must schedule a hearing within seven days after the seizure order was issued, and the target of the seizure order has a civil remedy for damages in the instance of a wrongful or excessive seizure.
DTSA takes effect upon enactment and will apply to “any misappropriation of a trade secret” that occurs “on or after the date of the enactment.” DTSA provides significant new remedies for trade secret theft or misappropriation. Trade secret owners should review their protection plans to ensure that they have the full protections and benefits of this new federal law.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Ronald E. Manthey
Debra L. Fischer
Greta L. Burkholder
S. 1890 was introduced by Senator Orrin Hatch (R-UT) and Senator Chris Coons (D-DE). S. 1890, 114th Cong., 1st Sess. (2015). During the Senate Judiciary Committee mark-up hearing on January 28, 2016, the authors offered an amendment in the nature of a substitute, which was unanimously accepted. S. 1890, 114th Cong., 2d Sess. (2016).
For further analysis of the trade secret reform legislation, see Statement of Mark Krotoski Submitted to the US Senate Judiciary Committee for the Hearing on Protecting Trade Secrets: The Impact of Trade Secret Theft on American Competitiveness and Potential Solutions to Remedy This Harm (Dec. 2, 2015).
 Similar bipartisan legislation, was introduced in the US House of Representatives. H.R. 3326 was introduced by Congressman Doug Collins (R-GA) and Congressman Jerrold Nadler (D-NY). H.R. 3326, 114th Cong., 1st Sess. (2015).
 Presentment Clause, US Const., Article I, Section 7, Clauses 2 and 3.
 For recent examples, see Trade Secret Examples Based on Recent Criminal and Civil Cases.
 Fed. R. Civ. P. 45(b)(2) (“A subpoena may be served at any place within the United States”).
 Pub. L. No. 104-294, 110 Stat. 3488 (Oct. 11, 1996) (codified as amended 18 U.S.C. §§ 1831–1839).
 S. 1890, § 2 (proposed § 1836(b)(1)).
 Id. (proposed § 1836(b)(2)).
 S. 1890 (proposed § 1836(b)(2)(A)(i)).
 Id. (proposed § 1836(b)(2)(E)).
 Id. (proposed § 1836(b)(3)(A)(i)(I)).
 Id. (proposed § 1836(b)(3)(A)(i)(II)).
 Id. (proposed § 1836(d)).
 S. 1890, § 3 (proposed § 1835(b)).
 Id. § 2 (proposed § 1836(b)(2)(D)(i)).
 Id. (proposed § 1836(b)(2)(D)(ii)).
 Id. (proposed § 1836(b)(2)(H)).
 Id. § 3(a) (amending § 1832(b)).
 Id. § 3(b).
 18 U.S.C. §§ 1962 (Prohibited activities). Under the RICO, criminal penalties are set forth in 18 U.S.C. § 1963, and civil remedies are provided in 18 U.S.C. § 1964.
 S. 1890, § 4.
 Id. § 6.
 Id. § 2(e).