Hunton Employment & Labor Perspectives

Congress gave companies a new weapon to fight trade secret theft this week. President Obama signed a law that addresses several issues that often mire trade secret litigation – cross border battles when multiple states are involved, venue and choice of law disputes, and lack of ability to seize trade secrets before they escape a state or the United States. Companies now have a civil federal cause of action (original federal jurisdiction) for trade secret theft and the ability to seize trade secrets through an ex parte temporary injunction procedure that could prove to be incredibly costly for the unfortunate company whose newly hired employee stole trade secrets from a former employer. There will be more to come on these elements over the next few weeks.

One interesting facet of the new law is that it was largely pitched as a tool for United States companies to protect trade secrets from foreign theft. As the President stated when signing the law:

"One of the biggest advantages that we've got in this global economy is that we innovate," Obama said at a signing ceremony while flanked by a bipartisan congressional delegation. "We come up with new services, new goods, new products, new technologies. Unfortunately, all too often, some of our competitors, instead of competing with us fairly, are trying to steal these trade secrets from American companies, and that means a loss of American jobs, a loss of American markets, a loss of American leadership."

However, the law is definitely not limited to foreign theft. Civil litigators who prosecute trade secret theft in the various states will be comfortable with the definition of “trade secrets” in the law, with the remedies available and the threat of attorneys’ fees being awarded for bad faith claims. All are similar to what currently exists in many states.

Whether practitioners will ultimately choose to pursue federal claims for trade secret theft over state law remedies (there is no preemption) will remain to be seen. State forums and statutes may be preferable for many cases. However, there will now be a decision to be made at the outset whether a matter should be in federal or state court. In future posts, we will dive deeper into the key features of the new law and what employers should know about them. Stay tuned.