The Passage of the Defend Trade Secrets Act of 2016

  • By Susan Burns
  • 02 Jul, 2016

It's a rare occasion that Congress actually agrees on something these days, but on April 27, 2016, the Defend Trade Secrets Act (DTSA) passed in the House and Senate by a sweeping majority. The bill is designed to prevent actual and threatened theft of business trade secrets, by allowing trade secret owners to bring a claim for misappropriation in federal court, as long as "the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce." On May 11, President Obama signed the DTSA into law.


Prior to the passage of the DTSA, trade secret litigation used to be handled solely under state laws, many of which were modeled after the Uniform Trade Secrets Act of 1996 (UTSA). While this shared legislative model allowed for some uniformity, Congress wanted to address the differences that exist in specific statutory provisions and case law, from state to state. The DTSA does not pre-empt these state laws, but rather makes a new federal remedy available for trade secret owners bringing misappropriation claims.

What is a trade secret?

A trade secret is a formula, process, technique, program, method, design, instrument, or compilation of information by which a business can gain an economic advantage over its competitors by virtue of it a secret. It is legally protectable under state law, federal criminal law, and now, federal law under the DTSA.

While the precise language defining a trade secret differs from one jurisdiction to the next, in general, three factors are in common. First, the trade secret is not generally known to the public. Second, the economic benefit is derived from the fact that the trade secret is not generally known. Third, the trade secret is subject to reasonable measures to protect its secrecy.

The DTSA defines misappropriation as the disclosure or use of a trade secret that was acquired through "improper means," which include "theft, bribery, misrepresentation, breach...or espionage through electronic or other means."

How does the DTSA protect trade secrets?

A trade secret owner can seek injunctive relief, compensatory damages, recovery of attorneys' fess, and punitive damages equal to two times the amount of damage the misappropriation caused. This is similar to the UTSA. However, the DTSA introduces several new aspects to trade secret litigation.

Most significantly, trade secret owners can now bring a claim for misappropriation under federal law, and in federal court. Also, the new law allows for an 'ex parte' seizure order in "extraordinary circumstances." If certain conditions are met, the government can seize property before notifying the defendant, so as to avoid dissemination of trade secrets by the defendant.

The DTSA provides whistleblower immunity to an employee or contractor that discloses a trade secret to law enforcement because of a suspected violation of law. This information must be presented in a sealed court filing to local, state, or government officials.


In order to obtain monetary damages in trade secret legal proceedings, businesses need to provide notice of whistleblower immunity to their employees and contractors. This corporate notice requirement applies only for agreements made on or after May 11, the date the bill was signed into law. Misappropriation claims cannot be brought in federal court more than three years after the misappropriation occurred, or should have been discovered.

The law also seems to permit a party to bring an action against a foreign entity. Congress addressed concerns about a rise in trade secret theft by foreign hackers. Particularly, the law seems to respond to reports that the Chinese government is sponsoring cyber attacks against top U.S. companies.


The DTSA addresses emergent cyber-espionage threats to large, targeted companies, but also protects the interests and valuable information of smaller businesses. Educate your employees about the protection of your business' trade secrets, with knowledge of the new federal remedy that is available through the DTSA.


More Posts from Susan's Blog


By Susan Burns 28 Feb, 2017

The driverless car industry is hot and super-competitive. That’s a given. Here’s what’s not hot if you are Waymo, the self-driving car business that was spun out of Google’s parent company:

By Susan Burns 19 Feb, 2017

Recently, there was a trademark spat between Adidas and Tesla. The story piqued my interest because   the big players make mistakes that are instructive for small businesses (only on a grander scale)—and because it illustrates the importance of brand identity and underscores why it’s smart to register your mark.

In a nutshell, here’s what happened: Tesla filed with the US Patent and Trademark Office (USPTO) to register its Model 3, three-bar logo as a trademark. If the registration had been for the purpose of using the mark on a car, there would not have been a problem. BUT, Tesla registered to use its three-bar “E” on clothing. Adidas, a company known for rigorous policing of its brand identity, challenged Tesla’s right to register the mark as confusingly similar to the Adidas three-bar logo. Tesla withdrew its application. Adidas protected its three-bar brand identity.
By Susan Burns 28 Oct, 2016

The Trans-Pacific Partnership (TPP) is the largest regional trade agreement in history, between the United States and 11 other Pacific Rim countries. Following in the footsteps of the North American Free Trade Agreement (NAFTA) between the US, Mexico, and Canada, the TPP expands upon this to establish new rules for global trade by eliminating 18,000 tariffs, promoting an open internet, disciplining state-owned enterprises, and establishing environmental and worker protection. Its aim is to increase Made-In-America exports, grow the US economy, support higher-paying US jobs, and strengthen the middle class.


You've probably heard references to the TPP in recent campaign coverage. It is the result of years of trade negotiations, and has been hailed as a hallmark victory for the Obama administration. However, the agreement is still in limbo, pending ratification by Congress--a delay that hardly comes as a surprise. And, both presidential candidates for the major parties have come out against the TPP. Given this, the future of the TPP is up in the air.


Supporters hope for a vote during the lame-duck session, but the TPP's passage could very likely depend on the next presidential administration. In the meantime, we are left to consider the implications of passage of this agreement, as well as its impact on NAFTA, a pre-existing trade agreement of a similar nature.


The TPP is a piece of legislation I have been closely following, and recently had the opportunity to moderate a panel entitled, "The Impact of TPP on NAFTA: Opportunity for Strengthening Ties -- Or Recipe for Disaster." Panel members included Aristeo Lopez of the Mexican Embassy, Laura Sierra of Alston & Bird, Nicholas Guzman of Drinker, Biddle & Reath, and Greg Kanargelidis of Blake, Cassels & Graydon.


The American Bar Association Section of International sponsored this event with the intention of presenting US, Mexican, and Canadian standpoints on the TPP and the impact of its passage on NAFTA. What followed was a thoughtful and informative discussion, and although the topic is highly complex, I thought I'd share some highlights with you.


Ms. Sierra explained some of the political context surrounding the TPP, including that the US has historically been pro-trade, and this is the first time since 1992 that trade has been a significant issue in presidential election year politics. US FTAs are modeled after NAFTA. The agreement eliminates a significant number of tariffs that would be beneficial to US businesses, but there are dissenting voices. Some of the concerns include employment issues, the manipulation of currencies by various countries, and opposition in specific industries such as auto, segments of agriculture and pharmaceuticals and biologics whose concerns were not addressed in the agreement. For example, intellectual property protection for biologics is not included in the agreement.


Mr. Lopez pointed out the benefits of NAFTA--growth in trade between Mexico and the US, especially--and explained that the TPP is intended to expand upon this growth, with attention to subjects that were treated less comprehensively in NAFTA. Another goal of TPP, in Mr. Lopez' view, is to strengthen Mexico's ties to NAFTA and other FTA partners, allowing Mexican goods to reach new markets.


Mr. Kanargelidis noted that the TPP is not intended to replace or override NAFTA, but that the two agreements can co-exist. He pointed out US, Mexican, and Canadian businesses can operate under the clauses of whichever agreement is most favorable to them in a given transaction. For example, the "de minimis" value threshold is 10% under TPP, and only 7% under NAFTA.


An audience member posed the question of whether TPP shipments will be exempt from US Merchandise Processing Fees (MPF) like NAFTA shipments are. Mr. Guzman explained that even though TPP does away with "ad valorem" fees, US Customs might find another way to collect MPF that is compliant with the agreement. He also described the TPP's "focused value" methodology for determining goods' origin, which might be more stringent than NAFTA methods.


Opponents to the TPP often cite concerns about the Investor-State Dispute Settlement (ISDS) provision, which outlines the mechanism by which agreement disputes can be settled. Mr. Lopez explained that the TPP’s ISDS provisions are more transparent than those found in NAFTA.


At the conclusion of the panel, Ms. Sierra suggested that a full renegotiation of the TPP is unlikely, given that the agreement was difficult to reach in the first place, and that several countries have already ratified it. However, we might see some side letters that result in alterations to the text pertaining to certain issues. Panelists agreed that the TPP will pass. It’s a matter of time and final form.


The TPP has been negotiated between 12 countries who together form about 40% of GDP, and 1/3 of world trade. The agreement is of an unprecedented scope, and the implications of this agreement are huge. We will soon know if it can pass during the lame-duck session before the election, which is fast approaching!


To learn more about the TPP, visit this site . The full text of the agreement can be found here .



Granville, Kevin. “The Trans-Pacific Partnership, Explained.” The New York Times. 20 August 2016. Web.

 “The Trans-Pacific Partnership.” Office of the United States Trade Representative. Executive Office of the President. 2016. Web.
By Susan Burns 08 Sep, 2016

In July, we reviewed the Defend Trade Secrets Act (DTSA) that passed in Congress by a sweeping majority, and was signed into law by President Obama on May 11—a rare piece of legislation that was largely agreed upon on both sides of the aisle!

In this post, “Trade Secrets: Part Two,” I want to emphasize the importance of understanding what a trade secret is, regardless of whether it is under the DTSA or state law. Surprisingly, many businesses I work with rely heavily on trade secrets for their economic livelihood, and they don’t know it. Not knowing and not tending to that little gold mine of yours can mean a significant financial hit to your business in many ways, not the least of which is losing your competitive advantage.

So, what are the components of a trade secret, and how do you protect it? Think of it in threes: the three key elements of a trade secret and three steps to protect it.

More Posts
Share by: