U.S. Congress Creates Federal Cause of Action for Trade Secret Misappropriation

by Knobbe Martens

For the first time in this nation’s history, the U.S. will have a federal trade secrets law that allows private citizens to enforce their trade secrets and sue for damages.  On Wednesday, April 27, 2016, the U.S. House of Representatives passed the Hatch-Coons Defend Trade Secrets Act of 2016 (“DTSA”).  The Senate approved the DTSA in a unanimous 87-0 vote earlier in the month.  The bill, which modifies the Economic Espionage Act by creating a private civil right of action for trade secret misappropriation, now goes to the White House for signature.  The President has expressed strong support for the legislation and is expected to sign the bill into law in the coming weeks.  

The DTSA will open up the federal courts to trade secrets owners and help harmonize trade secrets law across the nation.  No longer will trade secrets litigants have to rely on state trade secrets laws for protection.  Federal district courts will have original jurisdiction to hear DTSA cases, but the law will not preempt any other state or federal laws.  With the expansion of trade secrets protection, businesses need to evaluate whether this type of intellectual property protection is well suited for their innovations and business information.  Certain innovations and business information may not be readily ascertainable by competitors and, now that there will be a federal trade secret misappropriation law, businesses may find trade secrets law a more attractive option for enforcing their intellectual property rights in such innovations and information. Here are some highlights of the new law:

Civil Seizure Provision

The DTSA sets up a procedure whereby a court can, upon request from the plaintiff and in extraordinary circumstances, seize a defendant’s property without notice.  This extraordinary measure is available to prevent key evidence from being destroyed, moved, or hidden from the court.  Federal law enforcement officers will carry out the seizure order and the court will maintain possession of the seized materials until a hearing can be held.  The DTSA seizure scheme includes protections for defendants, including restricting access to the seized materials, requiring a hearing within 7 days of the seizure order, and allowing recovery of damages for a wrongful or excessive seizure.  The seizure provision of the DTSA is a controversial and powerful tool that is not available under the Uniform Trade Secrets Act, which has been adopted in many states.


Upon finding liability, a court may issue an injunction, on reasonable terms, to prevent any actual or threatened trade secret misappropriation.  However, the injunction cannot prevent a person from taking new employment and cannot otherwise conflict with applicable state laws prohibiting restraints on trade.  The court may award damages for the actual loss caused by trade secret misappropriation and any unjust enrichment that is not already addressed by the actual loss.  Damages can also be measured by a reasonable royalty in lieu of actual loss. In the case of a willful or malicious trade secret misappropriation, the court may also award exemplary damages in an amount not more than two times the amount of compensatory damages.  


Trade secrets take many forms and can include financial, business, economic, scientific, or engineering information, such as customer lists, business plans, compilations, formulas, designs, source code, prototypes, methods, processes, and procedures.  As storage devices have become smaller and the transmission of information faster and more robust, companies are more vulnerable than ever to trade secret theft from employees, third party collaborators, and external espionage activity.  The new federal trade secrets law will give businesses additional avenues to protect their innovations and valuable secret information.

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.

© Knobbe Martens | Attorney Advertising

Written by:

Knobbe Martens

Knobbe Martens 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.
Custom Email Digest
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.