1. DEFEND TRADE SECRETS ACT
Key Provisions
Huntsville Madison County Bar Association
December 8, 2016

2. Agenda Importance of DTSA Key Provisions European Harmonization
Situations & Solutions
Questions & Answers

3. Importance of DTSA Defend Trade Secrets Act (DTSA)
Most significant trade secret reform since Uniform Trade Secrets Act in 1979
Follow-on to American Invents Act “First Inventor to File” 2011 patent reform
Will dramatically change intellectual property practices and strategies
All Things Change -- Technology, Business and Politics

4. Technology, Business and Politics Since 1979
THEN
NOW
Durable goods
Machinery and hardware
Business
U.S. centric
Politics
Imports vs. Exports, Trade agreements
Technology
Software, biotech and cloud-based systems
Business
Global
Politics
Virtual imports/exports, international harmonization
VS.

5. Summary of DTSA Changes
New Federal law effective May 11, 2016
Amendment of Economic Espionage Act
Creates Private Federal Trade Secret Civil Action
Nationwide enforcement, with extraterritorial implications
3 year statute from discovery or “reasonably” discovered
Unique requirements and remedies
No pre-emption
More robust protection at less cost

6. DTSA Changes to Trade Secrets
Bradley - Confidential
DTSA Changes to Trade Secrets
Amendment of 18 USC 1836 creates federal jurisdiction
Sec. 2(c) - Original jurisdiction in U.S. District courts
Sec. 2(b) – Creation of private civil action
Sec. 2(d) – 3 year statute from discovered or “reasonably” discovered
Sec. 2(f) – No pre-emption of other laws

7. Amendment of Espionage Act (Criminal)
Bradley - Confidential
Unique Aspects of DTSA
Amendment of Espionage Act (Criminal)
Requires confidential proceedings
Provides for covert ex parte relief
Provides unique trade secret remedies
Exempts whistleblowers and reverse engineering
Implicates extraterritorial effects

8. Bradley - Confidential
Unique Aspects of DTSA
Sec. 2(b)(2)(A)(ii)(VII) – Provides for confidential ex parte proceeding
Sec. 2(b)(2)(A)(ii)(VIII) – Requires that applicant has not publicized requested seizure
Sec. 2(b)(2)(B)(iii) – Requires protective order to protect seizure property
Sec. 2(b)(2)(C)-Requires court to take action to protect against publicity
Sec. 2(b)(2)(D)(iii)-Requires court to take measures to protect confidentiality of seized materials

9. Unique Remedies of DTSA
Award of actual losses, unjust enrichment or a reasonable royalty (undefined)
2x damages for willful or malicious misappropriation
Attorneys fees and cost for bad faith
Limited employment injunctions
Civil seizure of property
Likely ability to also restrict or seize imports via the ITC (19 USC 1337, Tianrui Group v. ITC, 661 F. 3d 1322 (Fed. Cir. 2011))

10. Unique Remedies of DTSA
Bradley - Confidential
Unique Remedies of DTSA
Sec. 2(b)(2) – Provides for civil seizure of property
Sec. 2(b)(2)(A) – Provides for ex parte seizure order
Sec. 2(b)(3)(A) – Limited employment injunction
Sec. 2(b)(3)(B) – Award of actual losses, unjust enrichment or a reasonable royalty (undefined)
Sec. 2(b)(3)(C) – Award of 2x damages for willful or malicious misappropriation

11. Unique Limitations of DTSA
Bradley - Confidential
Unique Limitations of DTSA
Sec. 2(b)(2)(A)(ii)(VIII) - Requires lack of publicity by applicant
Sec. 3(a)(i)(II) – Prohibits injunction otherwise in conflict with state law regarding restraint of profession, trade or business
Sec. 3(b)(6)(B) – Expressly excludes reverse engineering, independent derivation or any other lawful means of acquisition

12. Extraterritorial Effect and Enforcement
Bradley - Confidential
Extraterritorial Effect and Enforcement
Sec. 5 Sense of Congress, references to… “theft within the U.S. and around the world, and harm wherever it occurs…”
Sec. 2(b)(1) “…for use in, interstate or foreign commerce.”
Sec. 4 “…occurring outside of the United States...”, “… sponsored by foreign governments or instrumentalities, or foreign agents…”
19 USC 1337, ITC 337 proceedings, see Tianrui Group v. ITC, 661 F. 3d 1322 (Fed. Cir. 2011)

13. Summary of Unique Provisions & Exceptions
Confidential proceedings
Provides for ex parte relief
Provides unique equitable and monetary remedies
Remedies available for extraterritorial threats
No Pre-emption of other laws
Requires lack of publicity by applicant
Exempts whistleblowers and reverse engineering
Prohibits injunction otherwise in conflict with state law regarding restraint of profession, trade or business

14. Compounded Effect of DTSA and AIA on IP
DTSA in light of:
Considerations :
AIA and recent patent decisions
Economic and cyber espionage
Reduced complexity and costs of enforcement
Alternative to patent litigation
Consider secrecy where the invention is not openly discernable
Trade Secrets as part of Strategic IP Plan
IP protection based on operational goals, cost and jurisdictions
Impact of rapidly changing technologies, life of a patent is relevant
Processes and procedures to protect under DTSA

15. European Harmonization
US Defend Trade Secrets Act (DTSA)
May 11, 2016
European Union Directive (EU) 2016/943, on the Protection of Trade Secrets
June 8, 2016
Coincidence or Collaboration?

16. Summary of EU 943 New EU 943 trade secret law effective June 8, 2016
First unified EU wide trade secret law
Creates Uniform Trade Secret Civil Action
EU wide enforcement, with extraterritorial implications
Unique requirements and remedies
No pre-emption of member country laws
Application to technology, business and employment

17. Commonalities of DTSA / EU 943
Substantial Similarities
Definition of Trade Secret
Prohibited Uses
Remedies
Exclusions
Extraterritoriality

18. Commonalities of DTSA / EU 943
Substantially Similar Remedies
Injunctive Relief
Confidential Proceedings
Ex Parte Seizures (Anton Pillar Action)
Attorneys fees and costs for bad faith
Award of actual losses, unjust enrichment or a reasonable royalty
2x damages for willful or malicious misappropriation

19. Commonalities of DTSA / EU 943
Substantially Similar Limitations
Exclusions for Reverse Engineering or Independent Creation
Exclusions for Regulatory and Whistleblower disclosures
Limited employment injunctions
No Pre-emption of other laws or remedies

20. EU 943 Labor Difference Protection of EU Labor Rights
Shall not effect collective bargaining agreements
Shall not add additional restrictions to employment contracts
Shall not effect the mobility of employees
October 25, 2016, White House issued directive for US reform of non-compete and employment restrictions – Coincidence or Collaboration?

21. Situations & Solutions
Client Considerations
Need advance preparations for protections
Need rapid response to mission critical threats

22. “Pirated Technical” Services
Technical employee “Exodus”
Co-workers leave around same time
Former employees start calling customers
Research confirms formation of a competing business
Customer receives substantially similar technical materials
Rogue employees had access to confidential technical, customer and pricing information

23. Sealed “Bidding War” Story
Rogue employee departs with little notice
Rogue employee leaves with box of “personal effects”
Co-employees notice actual personal effects left in rogue employee’s office
Search reveals to competitor and access to bid files before departing
Call to competitor confirms new employment

24. Operational Advice and Preparation
Preventative operational action checklist
Employee Handbook and Code of Conduct
Employee Confidentiality and Proprietary Rights Agreements – with Whistleblower exception
Non-disclosure and Confidentiality Agreements – with Whistleblower exception
Teaming and Development Agreement Confidentiality provisions – with Whistleblower exception
Marking and/or tracking of confidential materials
Physical and cyber security of confidential materials
Evaluation of overall IP strategy, including patents, copyrights and trademarks

25. Pre-preparations For Rapid Response
Advanced understanding of business and operations
Identification of critical trade secrets and locations
Assessment of key employees and possible weaknesses
Analysis of probable damages and desirable recourse
Evaluation of overall IP strategy, including patents, copyrights and trademarks
Advanced analysis of legal strategies
Competitors, activities and likely jurisdictions
Relative to overall IP strategy, i.e. patent, copyright and trademark rights and remedies
Determination of legal resources for rapid response

26. Rapid Response to Competitive Threats
Advanced preparation checklist
Description of critical trade secrets
Determination of applicable protections
Contact information for key employees
Summaries of competitors and activities
Determination of appropriate legal resources
Probable damages and desirable recourse
Possible jurisdictions and related information

27. Cross-border Considerations
Multinational Companies
Subject to dual enforcement
Ability to enforce in multiple jurisdictions
Harmonize policies, procedures and practices
International Agreements
Development, teaming or licensing issues
Staffing or performance
Delivery or payment
Choice of Law and Forum Provisions

28. Cross-border Operational Preparations
Preventative operational checklist
Employee Handbook and Code of Conduct
with Whistleblower exception
Employee Confidentiality and Proprietary Rights
Non-disclosure and Confidentiality Agreements
Confidential Teaming / Development Agreements

29. Cross-border Litigation Considerations
Forum Selection
Enforceability
Location For Protection and/or Recovery
Cost & Time relative to durable value / loss
Jurisdictional Considerations
Location of Illegal Acts
Location of Resulting Injury
Location of Recoverable Damages
Cross-border Litigation Considerations

30. DTSA - New Strategies for Technology and Business
New protections for competitive capabilities
New contract provisions, policies and procedures
New means to stop rogue employees and unscrupulous competitors
Questions & Answers?

31. For more information contact:
David Vance Lucas