Creating Federal Jurisdiction for Trade Secrets Litigation

By Mark W. Freel, Esq. of Locke Lord LLP Federal courts around the country will be granted broad original jurisdiction over virtually all trade secrets litigation if the U.S. House of Representatives passes the Defend Trade Secrets Act of 2015 (DTSA) in the form already unanimously approved by the U.S. Senate on April 4, 2016. The White House has already stated its strong support for the bill. The bipartisan legislation, which also enjoys support from the business community, would permit civil actions concerning the misappropriation of trade secrets to be brought in U.S. District Courts around the country, as long as the products or services at issue are aEURoeused in, or intended for use in, interstate or foreign commerce.aEUR? The DTSA would also create a new civil seizure remedy, which would be available on an ex parte basis in aEURoeextraordinary circumstances.aEUR? Under current jurisprudence, most trade secrets litigation occurs in state courts of general jurisdiction, except for instances in which a plaintiff is able to establish diversity jurisdiction as an independent basis for filing in Federal court. In 48 states, as well as in other districts and territories, most trade secrets claims are currently governed by various versions of the Uniform Trade Secrets Act (UTSA), as adopted by state legislatures. The UTSA defines what constitutes a trade secret in now-familiar terms, and defines what constitutes misappropriation. In the meantime, only certain limited provisions of the U.S. Code, enacted as part of the Economic Espionage Act of 1996, and codified at 18 U.S.C. ? 1831, et seq., currently address issues related to trade secrets. In large measure, those sections of Federal law provide criminal penalties for certain acts of economic espionage and for theft of trade secrets. Those provisions of the Economic Espionage Act provide for criminal forfeiture penalties, and permit the Attorney General to seek civil injunctive relief where appropriate, but otherwise do not provide for private civil remedies. The proposed DTSA passed by the Senate, and on its way to the House, would change that landscape by creating original (but not exclusive) Federal jurisdiction over all civil claims of misappropriation of trade secrets, as long as there is a sufficient link to interstate or foreign commerce. That link should not be hard to establish in most cases in todayaEUR(TM)s marketplace. The DTSA would permit Federal courts to award the same broad range of remedies currently available under the UTSA in most states, including injunctive relief against actual or threatened misappropriation, compensatory damages, exemplary damages, and attorneysaEUR(TM) fees. The DTSA employs definitions -- of a trade secret and of misappropriation -- that are substantially similar to those already employed in the UTSA in most states, but creates an entirely parallel track for seeking relief at the Federal level. As proposed, the DTSA would also provide for a new civil seizure remedy that a plaintiff can seek in appropriate circumstances in order to protect the status quo and place the subject information or data under court control, without public disclosure, during the pendency of the action. Under the proposed language now being considered by the Senate, such a seizure order would be available if the plaintiff could satisfy the requirements typically associated with preliminary injunctive relief, and otherwise satisfy the court that aEURoeanother form of equitable relief would be inadequate . . . because the party to which the order would be issued would evade, avoid, or otherwise not comply with such an order.aEUR? Such relief would be made available on an ex parte basis in extraordinary circumstances. In cases in which the court ordered such a seizure remedy, the court would take appropriate steps to maintain the confidentiality of the underlying information or data, as well as the confidentiality of the seizure order itself. The information would be held in the custody of the court pending further proceedings. The court would also have the power to appoint a Special Master to oversee the information and to isolate the subject trade secrets. In instances in which the seizure remedy was issued on an ex parte basis, the court would hold a hearing no later than seven (7) days after the entry of the order, unless otherwise agreed by the parties. Service of the seizure order would be made by a aEURoeFederal law enforcement officer.aEUR? But beyond the seizure remedy, the biggest impact of the DTSA would be the creation of general access to the U.S. District Courts, as a matter of Federal question jurisdiction, to address claims of misappropriation of trade secrets. The Federal courts would have a broad range of authority to award all of the same kind of remedies now available in most state court litigation under the UTSA. In order to bring such an action in Federal court, a litigant would simply have to demonstrate that the action is aEURoerelated to a product or service used in, or intended for use in, interstate or foreign commerce.aEUR?

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