Remedies Under the Defend Trade Secrets Act of 2016

By Scott Hampton, Karen Romrell, Aaron Burgoyne, and Ashley Bailey

On May 11, 2016, President Obama signed into law the Defend Trade Secrets Act of 2016 (“DTSA”).  The DTSA creates a federal cause of action for misappropriation of trade secrets.  The DTSA has similarities to the Uniform Trade Secrets Act (“UTSA”), which sought to provide a legal framework to protect trade secrets at the state level.  As of 2015, a majority of states had adopted some version of the UTSA; however, individual states’ application of the UTSA has caused wide variation in how economic remedies are calculated at the state level.  While not preempting existing state law, the DTSA creates a unified standard for trade secret misappropriation remedies.  Now that the DTSA is enacted into law, civil trade secret actions can be brought in federal court.

Building upon the UTSA framework, the DTSA provides similar definitions and remedies for trade secret misappropriation with one distinct and controversial addition—civil seizure of property to prevent the propagation of trade secrets, mitigating the extent of harm to the trade secret proprietor.  Under the DTSA, the court may issue an ex parte order for the seizure of property through an application based on affidavit or verified complaint that meets the court requirements.

In addition to civil seizure, the court may grant an injunction or award monetary damages.  Under the DTSA, the court may award damages (i) for actual loss caused by the misappropriation of the trade secret (ii) for any unjust enrichment caused by the misappropriation of the trade secret that is not addressed in computing damages for actual loss, and (iii) measured by a reasonable royalty for the misappropriator’s unauthorized disclosure or use of the trade secret (in lieu of damages measured by any other methods).  The DTSA makes clear that remedies apply to unauthorized disclosure as well as use of the trade secret.  Unlike copyright and trademark law, the DTSA is silent on the subject of apportionment and whether or not the burden of proving deductible costs shifts to the defendant when calculating an unjust enrichment remedy.

The DTSA does provide for awarding exemplary damages (in an amount not more than 2 times the amount of the damages awarded) if the trade secret is willfully and maliciously misappropriated.

With the passing of the DTSA, owners of trade secrets are now able to choose to file civil litigation at the state level or in federal court.

SCOTT D. HAMPTON, CPA/ABV/CFF is an expert witness with over 30 years of experience in forensic consulting.  He is the founder of Hampton IP & Economic Consultants, a forensic accounting and economic consulting firm which specializes in intellectual property valuation and the calculation of economic damages in commercial litigation.  Mr. Hampton offers testimony in courts across the United States relating to patent, trademark, and copyright infringement and misappropriation of trade secrets.  Mr. Hampton is a Certified Public Accountant licensed in California, Utah, and Washington.