On May 11, 2016, President Barack Obama signed the Defend Trade Secrets Act (DTSA) into federal law. The idea of statutory protection for trade secrets is not a new concept for residents of most of the United States. To date, 47 states, along with the District of Columbia, Puerto Rico, and the U.S. Virgin Islands have adopted some form of the Uniform Trade Secrets Act (UTSA). North Carolina also has statutory protection for the misappropriation of trade secrets even though it did not altogether adopt the UTSA. Only two states have remained under a common law system for trade secret protection: Massachusetts and New York. Massachusetts currently has a bill pending which would adopt the UTSA.
For residents of Michigan, not much changes. Michigan adopted the UTSA in 1998 and there are very few differences between the Michigan UTSA and the DTSA. Both allow an entity whose trade secret has been misappropriated to bring suit to seek injunction or damages. Under either act, an injunction may take the form of the prevention of a person having trade secrets from entering into employment with a competitor, taking affirmative action to protect the trade secret, or order the payment of a reasonable royalty. Damages may be sought under either act for actual loss, unjust enrichment, or a reasonable royalty. Also, under both acts, claims of misappropriation brought in bad faith will result in such a party paying the prevailing party’s attorneys’ fees. Both acts also have a statute of limitation of three years, which begins running at the date of the misappropriation.
However, there does remain one very significant difference. Under the new DTSA, if a trade secret is misappropriated wilfully and maliciously, the damages may be doubled. The Michigan UTSA does not contain such a provision. As a result, the DTSA may now end with many plaintiffs choosing to file their claims in federal court if they feel that they have sufficient evidence to support a claim that misappropriation was wilful and malicious. In addition, with the enactment of the DTSA, federal court seems like a good choice for those who have claims of misappropriation in other states. Prior to the enactment of the DTSA, the lack of a federal statute made enforcement of trade secrets non-uniform, slow and highly dependent on the particular state in which the misappropriation happened.
This article was written by Tyler Kemper, law clerk.
