Defend Trade Secrets Act

Question 1

Who can bring a civil action for misappropriation under the DTSA? And what does the trade secret have to be related to?

Answer 1

• The owner of the trade secret.
• A product or service that is used in - or intended for use in - interstate or foreign commerce.
  18 U.S.C. 1836(b)

Question 2

What remedies are available in a private cause of action under the DTSA?

Answer 2

1. an injunction to prevent the actual or threatened misappropriation of a trade secret;
2. damages for actual loss caused by the misappropriation of the trade secret;
3. damages for unjust enrichment caused by the misappropriation of the trade secret that is not addressed by the damages for actual loss;
4. (in lieu of damages measured by other methods): impose liability for a reasonable royalty for the misappropriator’s unauthorized disclosure or use of the trade secret;
5. if the trade secret is willfully and maliciously misappropriated: award exemplary damages in an amount not more than 2x the damages award for actual loss/unjust enrichment/royalties.
6. attorneys’ fees (in certain circumstances).

18 U.S.C. 1836(b)(3).

Question 3

What is the statute of limitations for a claim under the DTSA?

Answer 3

Three years. “A civil action may not be commenced later than 3 years after the date on which the misappropriation with respect to which the action would relate is discovered or by the exercise of reasonable diligence should have been discovered.” 18 U.S.C. 1836(d).

Question 4

What are the elements of a trade secret misappropriation claim under the DTSA?

Answer 4

(1) the existence of a trade secret, defined generally as information with independent economic value that the owner has taken reasonable measures to keep secret; (2) that is related to a product for service used in, or intended for use in, interstate or foreign commerce; and (3) the misappropriation of that trade secret, defined broadly as the knowing improper acquisition, or use or disclosure of the secret. 18 U.S.C. § 1836, 1839; Mallet, 16 F.4th at 380; Oakwood Labs LLC v. Thanoo, 999 F.3d 892, 905 (3d Cir. 2021). Each of these elements is predicated on an adequate identification of what the plaintiff contends to be its trade secret. Mallet, 16 F.4th at 380.

Question 5

Can a plaintiff recover attorneys’ fees under the DTSA?

Answer 5

If a claim of misappropriation is made in bad faith, a mo-tion to terminate an injunction is made or opposed in bad faith, or the trade secret was willfully and maliciously mis-appropriated, the court may award reasonable attorneys’ fees to the prevailing party. 18 U.S.C. § 1836(b)(3)(D). A party may establish that a claim of misappropriation is made in bad faith by circumstantial evidence. Id.

Question 6

What affirmative defenses are available in a DTSA action?

Answer 6

*The plaintiff’s alleged trade secret is not a trade secret;
*The defendant had a legal right to do what it did and violated no duty owed to plaintiff.
* Independent development;
* Authorized activity (example: did the parties have a licensing agreement?)
* Reverse engineering
* No detriment (example: plaintiff is no longer in business or has supplanted the alleged trade secret technology with superior technology; or, the defendant merely possessed the trade secret and did not use it).
* Laches: the plaintiff delayed in seeking injunctive relief.
* Unclean hands

Question 7

Does a plaintiff have to exhaust any administrative remedies before bringing a DTSA claim?

Answer 7

No - can file directly in court.

Question 8

If there are material facts in dispute, can a preliminary injunction be issued?

Answer 8

No - see JRM Const. Mgmt., LLC v. Pleascia, No. 23-cv-932, 2023 U.S. Dist. LEXIS 59380 (D.N.J. Apr. 4, 2023) (citing Collick v. Weeks Marine, Inc., 397 Fed. App’x 762 (3d Cir. 2010).

Question 9

What two threshold elements must be established to obtain a preliminary injunction?

Answer 9

(1) They are reasonably likely to prevail eventually in the litigation; and
(2) They are likely to suffer irreparable injury without re-lief.
Par Pharm., Inc. v. Quva Pharma, Inc., 764 Fed. Appx. 273, 277 (3d Cir. 2019); Huntington Learning Ctrs., Inc. v. Kearns-Jones, 2:17-CV-01174-CRE, 2017 U.S. Dist. LEXIS 185270 (W.D. Pa. Nov. 7, 2017); Bimbo Bakeries USA, Inc. v. Botticella, 613 F.3d 102 (3d Cir. 2010).

Question 10

If the first two threshold elements of a preliminary injunction are met, what are the final two elements?

Answer 10

(3) Whether an injunction would harm the defendant more than denying relief would harm the plaintiffs; and
(4) Whether granting relief would serve the public interest.
Par Pharm., Inc. v. Quva Pharma, Inc., 764 Fed. Appx. 273, 277 (3d Cir. 2019); Huntington Learning Ctrs., Inc. v. Kearns-Jones, 2:17-CV-01174-CRE, 2017 U.S. Dist. LEXIS 185270 (W.D. Pa. Nov. 7, 2017).

Question 11

Do all four factors in a preliminary injunction assessment always have the same weight?

Answer 11

No - The relative strength of the four factors will vary; some may weigh more heavily than others in the trial court’s assess-ment of whether relief is warranted. Fres-co Sys. USA v. Haw-kins, 690 Fed. Appx. 72, 75 (3d Cir. 2017).

Question 12

Can a moving party obtain a preliminary injunction if it fails to satisfy all four elements?

Answer 12

No - A party’s failure to establish any element in its favor renders a preliminary injunction inappropriate. Ace Am. Ins. Co. v. Wa-chovia Ins. Agency Inc., 306 Fed. Appx. 727, 732 (3d Cir. 2009), citing Nutrasweet Co. v. Vit-Mar Enters., Inc., 176 F.3d 151, 153 (3d Cir. 1999).

Question 13

Does a moving party have to show that the defendant has misappropriated its trade secrets to obtain a preliminary injunction?

Answer 13

No - An actual misappropriation of trade secrets is not required for injunctive relief to be granted; threatened misappropriation can be sufficient. Id. at 76; see also Pittsburgh Logistics Sys. v. LaserShip, Inc., 2:18-cv-1382, 2019 U.S. Dist. LEXIS 98470 (W.D. Pa. June 12, 2019)

Question 14

Does a trial court have to hold a hearing before ruling on a motion for a preliminary injunction?

Answer 14

No - The Third Circuit does not require a trial court to hold a hearing before ruling on a preliminary injunction but has sug-gested that a trial court should conduct an evidentiary hearing when “consideration of the injunction motion was influenced in some significant degree by credibility issues and factual dis-putes.” Fres-co Sys. USA v. Hawkins, 690 Fed. Appx. 72, 80 (3d Cir. 2017).

Question 15

To obtain a preliminary injunction, does the plaintiff have to identify the trade secrets that were allegedly misappropriated?

Answer 15

Yes - In a trade secret misappropriation claim, trial courts can-not evaluate if a plaintiff is likely to succeed on any element of their claim until the plaintiff has sufficiently described the trade secrets that were allegedly misappropriated. Mallet & Co. v. La-cayo, 16 F.4th 364, 381 (3d Cir. 2021). Thus, a plaintiff should not be granted preliminary injunctive relief on a trade secret misappropriation claim unless the supposed trade secrets are adequately identified and there is some evidence tying the de-fendant’s conduct to the taking of those trade secrets. Id. at 388.

Question 16

What does a plaintiff have to prove to establish that it would suffer an irreparable injury if the court declines to enter a preliminary injunction?

Answer 16

The moving party must demonstrate that the “potential harm . . . cannot be redressed by a legal or an equitable remedy follow-ing a trial” but rather “the preliminary injunction must be the only way of protecting the [moving party] from harm.” Campbell Soup, 977 F.2d at 91 (quoting Instant Air Freight Co. v. C.F. Air Freight, Inc., 882 F.2d 797, 801 (3d Cir. 1989)

Question 17

What types of harm are sufficient in a trade secret case to show that a plaintiff would suffer “irreparable harm” if the court fails to enter a preliminary injunction?

Answer 17

• There would be decreases in future sales of product that are currently in development;
• There would be harm to the plaintiff’s reputation and attractiveness to investors;
• Loss of control of reputation;
• Loss of trade;
• Loss of goodwill.
  Par Pharm, 764 Fed. Appx. at 280; Huntington Learning Ctrs., Inc. v. Kearns-Jones, 2:17-CV-01174-CRE, 2017 U.S. Dist. LEX-IS 185270 (W.D. Pa. Nov. 7, 2017);

Question 18

How long should a preliminary injunction remain in place in a trade secret case?

Answer 18

The Third Circuit has endorsed the use of “lead time” injunc-tions “whereby the trade secret injunction lasts only so long as is necessary to negate the advantage the misappropriators would otherwise obtain by foregoing independent development.” Par Pharm, 764 Fed. Appx. at 280.

Question 19

What must be established before a plaintiff can prove the three elements of a trade secret misappropriation claim?

Answer 19

the plaintiff must adequately identify what it contends to be its trade secret. Mallet, 16 F.4th at 380; Arconic Inc. v. Novelis Inc., No. 17-1434, 2020 U.S. Dist. LEXIS 231531 (W.D. Pa. Dec. 9, 2020)

Question 20

How does the DTSA define a “trade secret?”

Answer 20

The DTSA defines a trade secret as information that “the owner thereof has taken reasonable measures to keep…secret” and that “derives independent economic value, actual or poten-tial, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the in-formation.” 18 U.S.C. § 1839(d); Mallet, 16 F.4th at 381; Synthes, Inc. v. Emerge Med., Inc., 25 F. Supp. 3d 617 (E.D. Pa. 2014)

Question 21

Do trade secrets have to be technical in nature to be protected under the DTSA?

Answer 21

Trade secrets do not have to be technical in nature to be fully protected by Pennsylvania law. Bimbo Bakeries USA, Inc. v. Botticella, 613 F.3d 102 (3d Cir. 2010); Wound Care Ctrs., Inc. v. Catalane, 2011 U.S. Dist. LEXIS 12084 (W.D. Pa. 2011); Den-Tal-Ez, Inc. v. Siemens Capital Corp., 566 A.2d 1214, 1228 (Pa. Super. Ct. 1989) (en banc)

Question 22

Does a company’s decision to designate certain information as confidential or protected determine if it qualifies as a trade secret?

Answer 22

No - A company’s decision to designate information as confidential or protected is not conclusive in determining if it qualifies as a trade secret; information can be contractually protected from use or disclosure and not be a trade secret. Mallet, 16 F.4th at n.21; Iron Age Corp. v. Dvorak, 880 A.2d 657 (Pa. Super. 2005)

Question 23

Can a plaintiff bring a trade secret claim something that’s a secret within the plaintiff’s industry but not specifically to the plaintiff’s company?

Answer 23

No - Employers are free to identify and protect their particular proprietary information. Mallet, 16 F.4th at 386. These trade secrets, however, must be particular secrets of the complaining employer. Id. at 386 n.29. General secrets of the trade in which the employee is engaged are not protectable trade secrets. Id.

Question 24

What are the two most important factors in evaluating if something counts as a trade secret?

Answer 24

The crucial indicia for determining whether certain infor-mation constitutes a trade secret are substantial secrecy and competitive value to the owner. Warman v. Local Yokels Fudge, LLC, Civil Action No. 19-1224, 2022 U.S. Dist. LEXIS 233312 (W.D. Pa. Dec. 27, 2022); N3 Oceanic, Inc. v. Shields, CIVIL AC-TION No. 06-1304, 2006 U.S. Dist. LEXIS 58563 (E.D. Pa. Aug. 21, 2006); Synthes, Inc. v. Emerge Med., Inc., 25 F. Supp. 3d 617 (E.D. Pa. 2014)

Question 25

Will information always be deprived of trade secret protection because it is publicly available?

Answer 25

Information will not necessarily be deprived of protection as a trade secret because of it are publicly available. A confidential compilation and organization of public information can amount to a trade secret. Warman v. Local Yokels Fudge, LLC, Civil Ac-tion No. 19-1224, 2022 U.S. Dist. LEXIS 233312 (W.D. Pa. Dec. 27, 2022).

Question 26

Is determining if information qualifies as a trade secret a question or law or fact?

Answer 26

Determining whether certain information qualifies as a trade secret is usually a question of fact, such “factual issues are subject to summary judgment whenever the law as applied to uncontroverted facts shows that the movant is entitled to summary judgment.” Hill v. Best Med. Int’l, Inc., 2011 U.S. Dist. LEXIS 123845 (W.D. Pa. Oct. 24, 2011)

Question 27

What does it mean to take “reasonable measures” to keep information secret?

Answer 27

A trade secret owner does not have to take “every conceivable measure” to shroud his or her trade secret in absolute secrecy. Warman v. Local Yokels Fudge, LLC, Civil Action No. 19-1224, 2022 U.S. Dist. LEXIS 233312 (W.D. Pa. Dec. 27, 2022). “[A] complaint sufficiently alleges ‘reasonable measures’ to maintain secrecy of a trade secret where the facts alleged sup-port an inference that access was limited such that it would be difficult to acquire such trade secrets.” Houser v. Feldman, 569 F. Supp. 3d 216, 230 (E.D. Pa. 2021).

Question 28

Is the assessment of whether a plaintiff took “reasonable measures” to keep information secret a question of law or fact?

Answer 28

Courts have held that whether measures were reasonable is a question of fact and “the determination of whether a plaintiff’s efforts to maintain the secrecy of its alleged trade secrets were reasonable is not a question susceptible of black-or-white anal-ysis.” Warman v. Local Yokels Fudge, LLC, Civil Action No. 19-1224, 2022 U.S. Dist. LEXIS 233312 (W.D. Pa. Dec. 27, 2022).

Question 28

When can an employer be vicariously liable for an employee’s trade secret misappropriation?

Answer 28

Under Pennsylvania law, an employer may be vicariously liable for its employee’s intentional acts if the conduct (1) is similar in kind to that which the employee is hired to perform, (2) occurs “substantially within” the temporal and spatial scope of em-ployment, and (3) is “actuated,” at least in part, in service of the employer.