You may be able to litigate older trade secret misappropriation claims in federal court. Here’s how.

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Until a few years ago, if an employer wanted to pursue a claim for misappropriation of trade secrets, it probably had to do so in state court under state law. The Defend Trade Secrets Act of 2016 changed all that. The DTSA is a federal law that created a private federal civil cause of action for trade secret misappropriation. So, now, if an employee takes your precious trade secrets, you can sue under federal law in federal court. And, in certain circumstances, you can collect your attorney’s fees if you prevail. The DTSA has real teeth!

But, what if you learn that an employee misappropriated your trade secrets before the DTSA took effect on May 11, 2016. Are you stuck in state court?

Maybe not, according to a recent Pennsylvania federal court decision. In that case, the plaintiff alleged that one of its customers and one of its former employees had joined forces to develop some competing technology that, according to the plaintiff, had to have been the product of the plaintiff’s trade secrets.

The defendants moved to the dismiss the plaintiff’s DTSA claim because the plaintiff did not allege any specific acts of misappropriation on or after the DTSA May 11, 2016, enactment date. The plaintiff countered by arguing that because the defendants continued to use the misappropriated trade secrets after May 11, 2016, the DTSA claim remained viable.

Well, score one for the plaintiff. Here’s the Court’s analysis:

As Defendants note, the DTSA applies to “any misappropriation of a trade secret . . . for which any act occurs on or after the date of enactment of this Act.” … Although the statute does not reach misappropriation occurring entirely before the May 11, 2016, enactment date, it has been widely interpreted to reach a defendant’s continued use of trade secrets after the enactment date, even if the secrets were acquired earlier.

Among other things, the plaintiff alleged that its former employee continued to aid his new employer’s use of the plaintiff’s trade secrets. And that aid was rendered after May 11, 2016. Consequently, the court concluded that the plaintiff had stated a claim under the DTSA.

How much value does this decision have for your business? Hopefully, it doesn’t take two years to discover a potential theft of trade secrets. But, should that happen, you’ve got some added protection.

 

 

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