§ 6.01 The Defend Trade Secrets Act (DTSA)

• Jurisdiction: United States
• Publication year: 2020

§ 6.01 The Defend Trade Secrets Act (DTSA)

[1] Introduction

On April 27, 2016, Congress passed the Defend Trade Secrets Act (DTSA), which President Obama signed into law on May 11, 2016, and which became effective that same day and which created a new federal civil cause of action for trade secret mis-appropriation.¹ Congress intended for the DTSA to include definitions, remedies, and statute of limitations substantially similar to the Uniform Trade Secrets Act (UTSA).² "'Congress intended the DTSA to apply in substantially the same way as the states' trade secret laws, but with a much broader geographic and jurisdictional reach.'"³ One court has pointed out that the DTSA "does not contain any heightened pleading requirements for civil litigants."⁴ "Nor do DTSA's express provisions regarding civil proceedings incorporate any discovery procedure analogous to certain state law statutory requirements in trade secrets cases that require a plaintiff to first disclose trade secrets before being able to receive discovery from the defendant."⁵

The DTSA provides federal district courts with original jurisdiction for a claim of trade secrets misappropriation.⁶ Thus, a court will also then "have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution."⁷ Federal courts will have supplemental jurisdiction over certain garden-variety lawsuits, such as contract and employment disputes, that are otherwise a matter of state law jurisdiction. The open question is whether employers will seek to use this supplemental jurisdiction to bring employment and contract cases in federal courts.

The Federal Circuit in Intellisoft, Ltd. V. Acer America Corp. held that Acer's state law trade secret claims should never have been removed to federal court vacating the district court's judgment.⁸ The Federal Circuit reiterated longstanding precedent that only a "special and small category" of cases involving state law claims, such as those requiring resolution of a substantial patent question, give rise to federal subject matter jurisdiction. Cases in which a party uses patent as evidence of trade secret misappropriation, such as the present one, do not constitute such a category. In particular, the Federal Circuit reversed and remanded, holding that the district court should have granted Intellisoft's motion to remand. 28 U.S.C. § 1441 (and § 1338(a) on which it relies) provides for federal subject matter jurisdiction over state law claims only when a federal issue is " ' (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.'"⁹ The court only addressed the first factor rejecting Acer's assertions that Intellisoft's misappropriation claims necessarily depend on proving that Intellisoft's president was the inventor of the technology claimed in Acer's patents. Intellisoft's "reliance on a patent as evidence to support its state law claims does not necessarily require resolution of a substantial patent question."¹⁰ The court also rejected Acer's argument under § 1454, which allows for removal when a party asserts a claim for relief under the Patent Act. Because Acer had merely proposed to amend its counterclaim—the state court had not yet permitted such amendment—the proposed amendment was not contained in the operative pleading, and § 1454 formed no basis for removal.¹¹

To assert a claim under the Act, a plaintiff must allege an act of misappropriation occurring after the implementation date.¹² The DTSA amends the Economic Espionage EEA to provide for civil remedies in federal courts for "misappropriation" of trade secrets, so long as the "trade secret is related to a product or service used in or intended for use in, interstate or foreign commerce."¹³ The action must be commenced no later than "3 years after the date on which the misappropriation...