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Senate Passes Bill Providing Federal Trade Secret Cause of Action

The Senate on April 4, 2016, passed S. 1890, the "Defend Trade Secrets Act of 2015," to amend 18 U.S.C. §1836(b) to create a federal civil remedy for trade secret misappropriation. The bill now goes to the House of Representatives where a similar bill (H.R. 3326) is pending.

In addition to creating the private cause of action, the legislation details the procedures for obtaining civil seizure orders, injunctive relief, and damages for trade secret misappropriation and unjust enrichment where the trade secret "is related to a product or service used in, or intended for use in, interstate or foreign commerce."

Seizure Orders

Seizure orders would be available upon ex parte application under extraordinary circumstances to prevent the dissemination of the trade secret and upon a showing that a Rule 65 order or another form of equitable relief would be inadequate.

A seizure order would require a showing of irreparable injury and of likely success in showing (1) that the information is a trade secret, and (2) that the person named misappropriated the information or conspired to do so "by improper means." "Improper means" is defined to include theft and misrepresentation, but the definition expressly excludes reverse engineering, independent derivation or other lawful means of acquisition.

Under the bill, a hearing would be set at the earliest possible time, and not later than seven days after the order has issued, unless the party against whom the order is directed consents to another date. However, that person may move the court at any time to dissolve or modify the order after giving notice to the applicant. The bill also permits attorneys' fees for bad faith claims of misappropriation, and includes the following provision at Section (b)(2)(G):

"A person who suffers damage by reason of a wrongful or excessive seizure under this paragraph has a cause of action against the applicant for the order under which such seizure was made, and shall be entitled to the same relief as is provided under section 34(d)(11) of the Trademark Act of 1946 (15 U.S.C. 116(d)(11)."


The legislation would permit injunctive relief for actual or threatened misappropriation, provided that the injunction does not prevent a person from entering into an employment relationship, and that conditions placed on employment are based on evidence of the threatened misappropriation. In exceptional circumstances, an injunction could condition future use of the trade secret upon payment of a reasonable royalty for a period no longer than such use could be prohibited.

The remedy of actual and unjust enrichment damages is provided in the bill. In addition, the bill would provide, in lieu of other damages, a reasonable royalty for the unauthorized disclosure or use of the trade secret. In the case of willful violations, it permits exemplary damages in an amount not more that two times the amount of damages otherwise awarded.

The legislation includes a statute of limitations provision that bars a civil action later than three years after the date the misappropriation is discovered or should have been discovered with the exercise of reasonable diligence.

To see the Senate proceedings on S. 1890, click here​. ​