Federal Trade Secret Legislation Proposal Gains New Life

by Fisher Phillips

The prospects for federal trade secret legislation has heated up again as there appears to be bipartisan support for a new bill. After failing in previous years, Senator Coons (D) recently joined forces with Senator Hatch (R) to introduce a federal trade secrets act that would create a federal cause of action and create original federal question jurisdiction for trade secret actions in federal court.  For those of you who want to read the details, you can review a copy of the bill here, and you can read Senator Coons’ press release here. The bill is entitled the “Defend Trade Secrets Act.” Key aspects are as follows:

Civil claims for trade secret misappropriation may be brought in federal court.

Courts are expressly authorized to issue ex parte injunctions for preservation and seizure of evidence.  Applications for such orders would require notice to the US Attorney in that judicial district and proof that the defendant would destroy the evidence if given notice. A person who suffers damage by reason of a wrongful seizure has a cause of action against the applicant, and “shall be entitled” to recover damages for lost profits, cost of materials, loss of good will, and punitive damages if the seizure was sought in bad faith.

Much like state Uniform Trade Secrets Act statutes, courts may enjoin actual or threatened misappropriation. Query whether and how this may evolve into a federal claim for inevitable disclosure. Different states have gone different ways on this question. The stated purpose of the DTSA is to “harmonize U.S. law… to create a uniform standard for trade secret misappropriation.” At a minimum, the federal courts will have to decide where the federal law stands on this question that currently differs from state to state under virtually identical UTSA language.

Treble damages and/or attorneys’ fees for willful and malicious misappropriation.

Five-year statute of limitations.

The statute expressly states that it does not preempt state law.

The last point – preemption – raises numerous interesting questions. Although the bill is not intended to preempt state law, the US Supreme Court has held that "A state statute is void to the extent that it actually conflicts with a valid Federal statute". In effect, this means that a state law will be found to violate the Supremacy Clause when either of the following two conditions (or both) exist: 

1. Compliance with both the Federal and state laws is impossible

2. "[S]tate law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress"

What does this mean for states where courts are reluctant to afford customer lists trade secret protection? What about California, where employees may announce their affiliation with a new employer to trade secret customers? Different employers may prefer different outcomes on that issue. From the perspective of companies seeking to protect trade secret customer lists, the law across the country provides generally strong protection, but there are some exceptions. If the U.S. Courts were to construe the DSTA similar to the manner in which California courts construe the California UTSA, that could present limitations for companies who seek trade secret status for their customer lists. Naturally, other companies and departing employees may be comfortable with such a result. Either way, employers may want to begin thinking about this issue and consider whether they want to speak up as the bill works its way through committee. The press release notes that a number of large national entities have already endorsed the bill, including 3M, Abbott, AdvaMed, Boston Scientific, Caterpillar, Corning, DuPont, General Electric, Eli Lilly, Medtronic, Micron, Microsoft, Monsanto, Phillips, Proctor & Gamble and United Technologies, as well as the National Association of Manufacturers and the U.S. Chamber of Commerce.

At present, one website that tracks legislation gives the bill a three percent chance of passage and an eleven percent chance of the bill getting out of committee (click here). Consequently, there appears to be an opening to lobby for changes.  Indeed, this is far from the first time in recent years that Congress has considered federal trade secret legislation. We will continue to monitor this bill (and state legislation like the Massachusetts bill recently introduced). Check back for updates.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Fisher Phillips | Attorney Advertising

Written by:

Fisher Phillips

Fisher Phillips on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.