Recent DTSA Developments
In 2017, courts grappled with various issues with respect to the Defend Trade Secrets Act. First, there are nuances regarding the timing of the conduct to which the Act applies. In Cave Consulting Grp., Inc. v. Truven Health Analytics Inc., 2017 U.S. Dist. LEXIS 62109 (N.D. Cal. Apr. 24, 2017), the court stated that the plaintiff failed to state a claim under the DTSA because it did not adequately specify whether the misappropriation occurred before or after the Act became effective (May 11, 2016). But the court allowed the plaintiff to amend its claim, suggesting that even though the alleged misappropriator may have acquired or disclosed the confidential information prior to May 11, 2016, the Act also contemplates a theory of liability for improper use of information. The court stated “[n]othing suggests that the DTSA forecloses a use-based theory simply because the trade secret being used was misappropriated before DTSA’s enactment.” Therefore, plaintiffs in DTSA actions should be sure maintain usage of trade secret information after May 11, 2016, even if they cannot prove that the information was taken after this date.
Second, specific requirements were identified regarding proper pleadings under the DTSA. Plaintiffs must adequately allege that they took reasonable steps to maintain the secrecy of confidential information. In an action where the plaintiff did not allege that employees were required to sign confidentiality agreements or any other indicia of reasonable precautions to protect secret information, the court dismissed with prejudice. Raben Tire Co. v. Dennis McFarland, 2017 U.S. Dist. LEXIS 26051 (W.D. Ky. Feb. 24, 2017). But where a plaintiff alleged that it required employees to sign a confidentiality agreement and that information was not disseminated outside the workplace, the court found this sufficient to withstand a motion to dismiss. Aggreko, LLC v. Barreto, 2017 U.S. Dist. LEXIS 35573 (D. N. Dak. Mar. 13, 2017).
Finally, enforcement rights under the DTSA have been narrowed. Ex parte seizures of property in trade secret misappropriation cases were limited in California and Indiana, where courts held that statutory seizure orders are be available in extreme circumstances, when injunctions or temporary restraining orders would be inadequate. See OOO Brunswick Rail Mgmt. V. Sultanov, 2017 U.S. Dist. LEXIS 2343 (N.D. Cal. Jan. 6, 2017). Standards for seizures of property under the DTSA have therefore been held to be higher than for seizures under Rule 65 of the Civil Rules of Federal Procedure, for which courts have indicated strong preference.
To learn about how Castaybert PLLC can assist with trade secret matters, please click here.
