Trade Secrets – Part II: Protect Your Trade Secret After It Leaves Your “Door”

In a previous alert, some practical tips for preventing misappropriation of trade secrets were presented. Part II of this series presents some items for discussion with an attorney if you suspect or have discovered that someone has misappropriated your trade secret. Therefore, this article is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to any particular issue or problem.

In 2016 the Federal Government adopted a set of laws under the Defend Trade Secrets Act (“DTSA”). (18 U.S.C. §1831-1839). DTSA provides aggrieved trade secret owners with a private cause of action for civil trade secret misappropriation under federal law. DTSA doesn’t eliminate or preempt, but supplements the existing state law remedies, such as the California Uniform Trade Secret Act (“CUTSA”) for trade secret misappropriation. DTSA has adopted many of the provisions of the Uniform Trade Secrets Act. As a result, there are a number of similarities between DTSA and CUTSA. Both DTSA and CUTSA offer plaintiffs the following remedies:

Injunctive relief to prevent actual or threatened misappropriation;
Actual damages; and
Exemplary damages and attorneys’ fees for willful and malicious misappropriation.

If you are contemplating a lawsuit for trade secret misappropriation, then you should consider the following differences between DTSA and CUTSA.

DTSA	CUTSA
Whether DTSA provides more favorable remedies under the particular set of facts at issue than CUTSA, which makes the federal forum the better choice for the contemplated trade secret litigation: Compare.	Whether CUTSA provides more favorable remedies under the particular set of facts at issue than DTSA, which makes the state forum the better choice for the contemplated trade secret litigation: Compare.
Does DTSA Authorize Injunction That Does Not Conflict With Applicable State Law Prohibiting Restraints on Trade/Business (e.g., California Business and Professions Code)? DTSA expressly authorizes injunctions to prevent any actual or threatened misappropriation. 18 U.S.C. § 1836(b)(3)(A)(i)(I)). An injunction that places narrowly tailored conditions on a former employee’s employment to prevent any actual or threatened misappropriation, without preventing the former employee from entering into the new employment relationship, does not conflict with an applicable state law prohibiting restraints on trade/business, such as the California Business and Professions Code (Cal. Bus. & Prof. Code §§ 16600 – 16607).	Does CUTSA Authorize Injunction That Does Not Conflict With Applicable State Law Prohibiting Restraints on Trade/Business (e.g., California Business and Professions Code)? N/A . . . . . . . . . .
Whistleblower Immunity The DTSA includes protections for whistleblowers who disclose trade secrets to governmental authorities or an attorney for reporting or investigating a suspected violation of law.	Whistleblower Immunity CUTSA also includes protections for whistleblowers.. . .
Mandatory Requirement re Whistleblower Immunity DTSA requires employers to provide notice of this immunity to employees, contractors, and consultants in any contract or agreement entered into or amended after the effective date of the DTSA (5/11/2016). An employer that does not provide the required notice is precluded from recovering exemplary damages or attorneys’ fees under the DTSA in an action against an employee to whom notice was not provided.	Mandatory Requirement re Whistleblower Immunity N/A . . . . . .
Extraordinary Remedy: Ex Parte Seizure Orders DTSA expressly allows a plaintiff to request a court order, without providing any notice to the defendant, to seize the defendant’s property to prevent further misappropriation. Here, a plaintiff would need to show that an injunctive relief would be inadequate because the person against whom the seizure is to be ordered, would destroy, move, hide, or otherwise make the materials to be seized inaccessible to the court, if the person had advance notice of the application.	Extraordinary Remedy: Ex Parte Seizure Orders N/A . . . . . . . .

DTSA

CUTSA

Whether DTSA provides more favorable remedies under the particular set of facts at issue than CUTSA, which makes the federal forum the better choice for the contemplated trade secret litigation: Compare.

Whether CUTSA provides more favorable remedies under the particular set of facts at issue than DTSA, which makes the state forum the better choice for the contemplated trade secret litigation: Compare.

Does DTSA Authorize Injunction That Does Not Conflict With Applicable State Law Prohibiting Restraints on Trade/Business (e.g., California Business and Professions Code)?

DTSA expressly authorizes injunctions to prevent any actual or threatened misappropriation. 18 U.S.C. § 1836(b)(3)(A)(i)(I)).

An injunction that places narrowly tailored conditions on a former employee’s employment to prevent any actual or threatened misappropriation, without preventing the former employee from entering into the new employment relationship, does not conflict with an applicable state law prohibiting restraints on trade/business, such as the California Business and Professions Code (Cal. Bus. & Prof. Code §§ 16600 – 16607).

Does CUTSA Authorize Injunction That Does Not Conflict With Applicable State Law Prohibiting Restraints on Trade/Business (e.g., California Business and Professions Code)?

N/A

Whistleblower Immunity

The DTSA includes protections for whistleblowers who disclose trade secrets to governmental authorities or an attorney for reporting or investigating a suspected violation of law.

Whistleblower Immunity

CUTSA also includes protections for whistleblowers..

Mandatory Requirement re Whistleblower Immunity

DTSA requires employers to provide notice of this immunity to employees, contractors, and consultants in any contract or agreement entered into or amended after the effective date of the DTSA (5/11/2016). An employer that does not provide the required notice is precluded from recovering exemplary damages or attorneys’ fees under the DTSA in an action against an employee to whom notice was not provided.

Mandatory Requirement re Whistleblower Immunity

N/A

Extraordinary Remedy: Ex Parte Seizure Orders

DTSA expressly allows a plaintiff to request a court order, without providing any notice to the defendant, to seize the defendant’s property to prevent further misappropriation. Here, a plaintiff would need to show that an injunctive relief would be inadequate because the person against whom the seizure is to be ordered, would destroy, move, hide, or otherwise make the materials to be seized inaccessible to the court, if the person had advance notice of the application.

Extraordinary Remedy: Ex Parte Seizure Orders

N/A

The most practical concept in protecting one’s trade secret is planning ahead. For starters, identify the trade secrets used in your company’s product or services. Reference is made to the comparison chart above: Is the trade secret related to a product or service used in or intended for use in interstate or foreign commerce?

If you have any questions about preventing misappropriation of trade secrets or the DTSA, please contact Esther J. Choe. Esther is an Associate in Leech Tishman’s Intellectual Property Practice Group. Esther is based in the firm’s Pasadena office and can be reached at 626.796.4000 or echoe@leechtishman.com.

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