The Novel Remedy of Ex Parte Civil Seizure Under The Defend Trade Secrets Act, 0118 SCBJ, SC Lawyer, January 2018, #18

Author:William M. Wilson III, Wallace K. Lightsey and Stephen R. Layne, J.
Position:Vol. 29 Issue 4 Pg. 18
 
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The Novel Remedy of Ex Parte Civil Seizure under the Defend Trade Secrets Act

Vol. 29 Issue 4 Pg. 18

South Carolina Bar Journal

January, 2018

William M. Wilson III, Wallace K. Lightsey and Stephen R. Layne, J.

Imagine you are having a quiet day at the office when you receive a call from a corporate client in need of fast action to protect valuable trade secrets. Your client has compelling evidence that a recently terminated employee dishonestly gained possession of confidential computer files without authorization and then sought to cover it up. The files would prove to be invaluable in the hands of a competitor, and your client wants to secure their return and to prevent any further dissemination of this valuable information. You are ready to jump into action, but what do you do?

As recently as May 2016, your best option for immediate protection would be to seek a TRO and injunctive relief under the South Carolina Trade Secrets Act.1 Under this scheme, however, the best you could hope for would be to obtain a court order prohibiting the defendant from using or sharing the information constituting a trade secret. But the obvious limitation of this relief is that you have no choice but to rely upon the defendant to comply with the order when it is that same defendant that already displayed dishonesty. Further, by the time you obtain the relief, it may already be too late.

But now, if the trade secret is related to a product or service used or intended for use in interstate or foreign commerce, there is a powerful new remedy under federal law: an ex parte order for civil seizure. Under the Defend Trade Secrets Act, 18 U.S.C. §§ 1831 et seq. (DTSA) effective as of May 2016, a broad federal scheme for the protection of trade secrets allows an aggrieved party, without notice to the other side, to seek an order in U.S. District Court for federal marshals to seize storage devices or other property if “necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.”2

In this manner, a trade secret case can be won before it even begins. Often the most important objective of a legal action fled against someone who misappropriated trade secrets is to recover the trade secrets and prevent any further misappropriation or dissemination of the confidential information. Under state versions of the Uniform Trade Secrets Act, this objective might never be accomplished because an unscrupulous defendant might deny any misappropriation and hide the evidence. However, under the DTSA, the objective of recovery may be accomplished at the very outset of a case, potentially reducing the cost and expense of protracted litigation. Although the risk of non-recovery still exists, a plaintiff can place more confidence in an involuntary seizure of property likely to contain the trade secrets than in a voluntary turnover of the trade secrets, and this confidence can help bring about a prompt resolution of the dispute.

The granting of such a powerful weapon to a plaintiff undoubtedly has the very real potential of abuse. A plaintiff armed with a federal court order to seize private property could wreak havoc without appropriate checks. As a result, the DTSA contains numerous provisions in order to ensure that a civil seizure order only issues under “extraordinary circumstances.”3 Some of these protections include that the plaintiff must present specific facts (by affidavit or verified complaint) demonstrating that: a standard order for equitable relief under Rule 65 would be inadequate because the defendant “would evade, avoid, or otherwise not comply with such an order”; an...

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