10.7 The Defend Trade Secrets Act

LibraryEmployment Law in Virginia (Virginia CLE) (2020 Ed.)

10.7 THE DEFEND TRADE SECRETS ACT

10.701 Purpose and Operation of the Act. The Defend Trade Secrets Act 220 is designed to provide a federal remedy for misuse of trade secrets. Based on the Uniform Trade Secrets Act, 221 the federal law relies on definitions of "trade secret" and "misappropriation" that are very similar to the Virginia Uniform Trade Secrets Act. 222

This statute, which became effective May 11, 2016, allows employers faced with misuse of their trade secrets a path to federal court, with its ease of access to witnesses across state lines, without having to meet the requirements for diversity jurisdiction, so long as the trade secrets at issue are used or intended to be used in interstate commerce. 223

10.702 Remedies

A. Injunctive Relief. Under the DTSA, a court can award an injunction to prevent an actual or threatened misappropriation. 224 The federal statute also provides a procedure for obtaining, ex parte, seizure of property in "extraordinary circumstances" for the purpose of preventing dissemination of a trade secret. 225

B. Damages. Pursuant to the DTSA, a court may award damages for actual loss caused by the misappropriation, and damages for unjust enrichment not compensated by the award of actual loss, or a reasonable

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royalty. 226 The court may also award exemplary damages of up to two times the compensatory damages if misappropriation is willful and malicious. 227

C. Attorney Fees. In a proceeding pursuant to the DTSA, the court may award reasonable attorney's fees to the prevailing party if (i) the trade secret was willfully and maliciously misappropriated, (ii) a claim of misappropriation was made in bad faith, or (iii) a motion to terminate an injunction was made, or opposed, in bad faith. 228

D. Statute of Limitations. A civil action under the DTSA must be brought within 3 years after the misappropriation is, or with the exercise of reasonable diligence should have been, discovered. 229

E. Special Protections for Employees. When a court issues an injunction against misappropriation pursuant to the DTSA, it must tailor its injunction to prohibition of the misappropriation; it cannot prohibit an individual from entering into an employment relationship 230 altogether. An individual is not liable for disclosure of a tradc secret (i) if the disclosure is made in confidence to a federal, state or local government official, or to an attorney, solely for the purpose of reporting or investigating a suspected...

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