The Eastern District of Pennsylvania recently granted immunity under the whistleblower provision of the Defend Trade Secret Act in what appears to be the first decision of its kind under the new federal trade secret statute. The DTSA’s whistleblower immunity safe harbor protects employees from civil or criminal liability for a confidential disclosure of trade secrets to an attorney “solely for the purpose of reporting or investigating a suspected violation of law.” There have been relatively few decisions interpreting this section of the DTSA since its enactment, all of which found that the whistleblower provision was not satisfied. See, e.g., Unum Grp. v. Loftus, 220 F. Supp. 3d 143 (D. Mass. 2016). With the first decision granting immunity under the whistleblower provision, litigants now have further guidance as to circumstances where the whistleblower provision may apply.
The Defend Trade Secrets Acts (DTSA) provides an important tool for any company possessing trade secrets to bring a suit in federal court to remedy and prevent dissemination of a misappropriated trade secret. Specifically, under 18 U.S.C. § 1836, the DTSA creates a federal private civil cause of action for trade secret misappropriation in which “[a]n owner of a trade secret that is misappropriated may bring a civil action . . . if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” But what about conspiracy to commit trade secret misappropriation – can a private party bring a civil action for conspiracy to commit trade secret misappropriation under 18 U.S.C. § 1832(a)? The Eastern District of Virginia in Steves and Sons, Inc. v. Jeld-Wen, Inc., CA No. 3:16-cv-545 (E.D. Va.) recently addressed this novel question, and found that the answer is “no.” Continue Reading DTSA Does Not Create a Private Civil Cause of Action for Conspiracy to Commit Trade Secret Theft
The Defend Trade Secrets Act (DTSA) Ex Parte Seizure mechanism allows victims of trade secret misappropriation to quickly prevent further dissemination of confidential information by asking a court to direct federal marshals to seize stolen trade secret material and secure that material during the pendency of a formal DTSA case. The DTSA directs that civil seizure only be used in “extraordinary circumstances,” however, and courts entertaining requests for civil seizure have hewed closely to this directive. See, e.g., OOO Brunswick Rail Mgt. v. Sultanov, Case No. 5:17-cv-00017 (N.D. Cal. Jan. 6, 2017) (denying request for civil seizure and instead ordering preservation of devices at issue pursuant to Rule 65); Magnesita Refractories Co. v. Mishra, 2:16-cv-524 (N.D. Ind. Jan. 25, 2017) (same); Dazzle Software II, LLC v. Kinney, Case No. 1:16-cv-12191 (E.D. Mich. July 18, 2016) (denying request for civil seizure where court not convinced that defendant would not comply with order under Rule 65); Balearia Caribbean Ltd. Corp. v. Calvo, Case No. 1:16-cv-23300 (S.D. Fla. Aug 5, 2016) (“a plaintiff may not rely on bare assertions that the defendant, if given notice, would destroy relevant evidence”).
In what appears to be the first civil seizure order under the DTSA, in Mission Capital Advisors LLC v. Romaka, No. 16-cv-5878 (S.D.N.Y. July 29, 2016), the U.S. District Court for the Southern District of New York ordered federal marshals to seize contact lists and other electronically-stored information that was allegedly misappropriated by Defendant, a former employee of Plaintiff. The circumstances of this case provide insight into what “extraordinary circumstances” are necessary for a district court to order civil seizure under the DTSA. Continue Reading DTSA and Ex Parte Seizure – Lessons from the First Ex Parte Seizure Under The DTSA
A recent decision in the Northern District of Illinois gave life to the inevitable disclosure doctrine under the Defend Trade Secrets Act. Inevitable disclosure is a common law doctrine by which a court can prevent a former employee from working for a competitor of his or her former employer where doing so would require the employee to depend upon his or her former employer’s trade secret information. See, e.g., PepsiCo, Inc. v. Redmond, 54 F.3d 1262 (7th Cir. 1995). To date, some commentators have suggested that the inevitable disclosure doctrine is not available under the DTSA because of language in the statute indicating that any injunction granted under the statute to prevent trade secret misappropriation may not “prevent a person from entering into an employment relationship,” and that any conditions placed on employment must be based on “evidence of threatened misappropriation and not merely on the information the person knows.” The Northern District of Illinois’s decision in Molon Motor and Coil Corp. v. Nidec Motor Corp., No. 16 C 03545 (N.D. Ill. May 11, 2017), however, suggests that the inevitable disclosure doctrine may continue to be useful for trade secret plaintiffs asserting claims under the DTSA.
A recent decision in the Western District of Kentucky highlights the importance of explaining in a complaint under the Defend Trade Secrets Act why the allegedly misappropriated information qualifies for trade secret protection. The decision is an important reminder that it is not enough to simply call something a “trade secret” in a complaint under the DTSA. Rather, a plaintiff must plausibly allege how the information qualifies as a trade secret. Where a plaintiff fails to do so, the complaint is susceptible to dismissal with prejudice under Fed. R. Civ. P. 12(b)(6).
As regular readers of this blog will know, our cross-disciplinary Trade Secrets team has been closely monitoring the development of the Defend Trade Secrets Act (DTSA).
In a webinar organized by The Knowledge Group, Bret Cohen will discuss the DTSA in 2017, and will address the following topics:
- The DTSA Under Trump’s Administration
- Defend Trade Secrets Act – In the 2017 Landscape
- DTSA in the 2016 Landscape: A Recall
- Trade Secret Litigation Trends in 2017
- Trade Secret and Non-Compete Law
- Investigations Under DTSA
- DTSA Injunctions
- Seizure Provisions of the DTSA
- Threatened Disclosure vs Inevitable Disclosure Injunctions
- New Immunity for Whistleblowers
- Recent Cases and Hot Topics
The Defend Trade Secrets Act (DTSA) civil seizure mechanism provides victims of trade secret theft with a tool to immediately freeze dissemination of stolen proprietary information. Using civil seizure, a court may direct federal marshals to seize property necessary to prevent the promulgation of stolen trade secrets. Civil seizure can only be employed in “extraordinary circumstances,” however, and a request for civil seizure has never been granted, though only a handful of requests have been made under this DTSA mechanism, which is still less than a year old (the most recent request was denied in the Northern District of California in OOO Brunswick Rail Mgt., et al. v. Sultanov, et al., No. 5:17-cv-00017 (N.D. Cal. Jan. 6, 2017)).
The story of civil seizure and the DTSA does not end there. Continue Reading The DTSA and Civil Seizure Under Federal Rule of Civil Procedure 65
An important question for any plaintiff alleging trade secret misappropriation is: “How much detail should I provide about the stolen trade secrets in the complaint?” Answering this question often requires the balancing of two important considerations. On the one hand, plaintiffs alleging trade secret theft are rightly cautious about detailing proprietary company information in a public complaint, especially given that public disclosure of a trade secret may cause the information to lose its protected trade secret status. On the other hand, plaintiffs must put a sufficient amount of detail into the complaint to state a claim and survive a motion to dismiss. This is a very important yet often difficult balance to strike. The U.S. District Court for the Northern District of Illinois in Mission Measurement Corp. v. Blackbaud, Inc., Case No. 16 C 6003, U.S. Dist. LEXIS 148607 (N.D. Ill. Oct. 27, 2016) recently addressed how much detail to include about a misappropriated trade secret in a complaint under the Defend Trade Secrets Act (DTSA). The court found that only a general description of trade secret information was required to survive a motion to dismiss.
Trade secret theft is a growing threat to American businesses. One obstacle to addressing misappropriation through a lawsuit can be a lack of direct evidence of theft. For example, if an employee leaves his company to work for a competitor and, some months later, the competitor comes out with a product similar to that of the original employer with features previously unique to the original product, it might be inferred that the employee improperly took trade secret information to the competition. A decision in the U.S. International Trade Commission (ITC) this past summer suggests that these facts, without more compelling evidence, may be insufficient to support a finding of trade secret misappropriation. The decision is an important reminder to all trade secret owners to develop a comprehensive trade secret management plan that tracks a company’s trade secrets and who has access to them so that theft can be documented and used in judicial actions, if necessary.
In August 2015, the ITC instituted an investigation based on allegations by Jawbone that Fitbit misappropriated 154 Jawbone trade secrets through the recruitment of a former Jawbone employee. The trade secrets at issue generally relate to the manufacturing and testing of Jawbone wrist worn activity monitors that track a user’s activity and the number of calories the user has expended.
As regular readers of the Global IP Matters blog will know, our cross-disciplinary Trade Secrets team recently published an article through the ABA’s Business Law Today newsletter focused on the Defend Trade Secrets Act (DTSA). Other publications have inquired about our background in the space and have requested articles with slightly different takes on the impact of the law. On October 26, two such articles were published, one in Bloomberg BNA’s Daily Labor Report and the other in the Boston Patent Law Association’s Fall newsletter.
The importance of the DTSA to business segments across organizations cannot be underestimated, a point driven home by the varying audiences of those three disparate publications – one targeted to corporate counsel generally, another toward human resources and employment-focused lawyers, and the third toward patent and technology attorneys.
Each article on the DTSA takes a slightly different approach and we invite you to read the one (or ones) which match most closely your business focus. If you have questions about the law, do not hesitate to reach out to our experienced team who will be happy to field them.
Boston Patent Law Association’s Fall Newsletter – The DTSA: Examining the DTSA’s Language, Use, and Future
Bloomberg’s BNA Daily Labor Report – Explaining the Defend Trade Secrets Act