Finally, Federal Protection of Trade Secrets – May 12, 2016

Fox Rothschild

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Litigation Alert | May 2016 seized must remain in the custody of the court (and out of the possession of the moving and non-moving parties) until there is a full court hearing on the seizure and potential return of property to either party. An order entered under the DTSA can also allow state or local law enforcement officials to participate in the seizure, but the moving party cannot. Local officials can also solicit the service of technical experts (unaffiliated with the moving party) to assist in the seizure. The court can also appoint a special master who can facilitate the return of unrelated property and data that may be seized as part of the overall seizure. In other words, the DTSA formalizes and legitimizes a type of self-help trade secret protection while, at the same time, excluding the moving party from that process.

By doing so, the moving party avoids allegations by the responding party that the self-help was excessive in some way. By the same respect, the non-moving party can have some level of assurance that the moving party is not going to access the responding party’s own trade secrets in the process and, in fact, will have that unrelated material captured in a seizure returned to the responding party. Beyond injunctive relief, the DTSA provides for the award of damages for any of the following: (1) actual loss caused by the misappropriation; (2) unjust enrichment caused by the misappropriation not otherwise addressed by the actual loss; or (3) a reasonable royalty for the unauthorized disclosure of the trade secret. Exemplary damages of not more than two times the actual loss may be awarded for willful and malicious misappropriation. Although the DTSA provides companies with a hammer to enforce their trade secrets, the DTSA also punishes a party who acts inappropriately in either claiming trade secret protection or infringing with another’s trade secrets. If a claim of misappropriation is made in bad faith, the prevailing responding party is entitled to its reasonable attorney’s fees.

Conversely, the moving prevailing party is entitled to its attorney’s fees where the misappropriation was willful and malicious or where a motion to terminate an injunction is made in bad faith. The DTSA finally provides companies with a federal right and forum in which to protect their trade secrets through injunctive relief, seizures of misappropriated trade secrets and monetary damages. Through the attorney’s fee shifting provision, the DTSA provides companies with a further financial incentive to go after a company that misappropriated trade secrets in bad faith. At the same time, companies must act with caution because pursuing a claim in bad faith could result in you paying your opponent’s attorney’s fees. For more information about this alert, please contact Joshua Horn at 215.299.2184 or jhorn@foxrothschild.com or any member of the firm’s Litigation, Intellectual Property or Corporate Departments. Attorney Advertisement © 2016 Fox Rothschild LLP.

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