IP Law

The Defend Trade Secrets Act: A Complete Guide

The Defend Trade Secrets Act of 2016 transformed American trade secret law by creating a federal civil cause of action for misappropriation. For the first time, trade secret holders could bring claims in federal court without relying on state law alone. Understanding the DTSA is essential for any company protecting proprietary information in the US.

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Key Takeaway

The DTSA requires trade secret holders to demonstrate they took 'reasonable measures' to maintain secrecy. Blockchain timestamps from immut provide documented, timestamped evidence of these measures — creating a verifiable audit trail that directly supports DTSA claims in federal court.

Background and Purpose

Before 2016, trade secret holders in the US could only bring civil claims under state law — typically the Uniform Trade Secrets Act (UTSA), adopted by 48 states. This created inconsistency: different states interpreted key provisions differently, and cases involving misappropriation across state lines faced jurisdictional complications. The DTSA, signed into law by President Obama on 11 May 2016, amended the Economic Espionage Act of 1996 (18 USC 1836) to create a federal civil cause of action for trade secret misappropriation. It did not preempt state law — both federal and state claims can coexist — but it gave trade secret holders the option of filing in federal court with nationally consistent standards. The Act was passed with overwhelming bipartisan support (87-0 in the Senate, 410-2 in the House), reflecting the growing importance of trade secret protection in the modern economy. The Department of Commerce estimates that trade secrets are worth $5 trillion to the US economy.

Definition of a Trade Secret

Under the DTSA (18 USC 1839(3)), a trade secret includes all forms and types of financial, business, scientific, technical, economic, or engineering information, provided that: 1. The owner has taken reasonable measures to keep such information secret; and 2. The information derives independent economic value, actual or potential, 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 information. This definition is intentionally broad. It covers formulas, patterns, compilations, program devices, methods, techniques, processes, procedures, programs, and codes. The breadth means that virtually any type of proprietary business information can qualify — provided the two conditions are met. The 'reasonable measures' requirement is the element most frequently litigated. Courts examine the totality of a company's secrecy efforts, including access restrictions, NDAs, employee training, labelling of documents, and digital security measures. Blockchain timestamps serve as powerful evidence of these reasonable measures.

Misappropriation Under the DTSA

The DTSA defines misappropriation as either: 1. Acquisition of a trade secret by someone who knows or has reason to know it was acquired by improper means; or 2. Disclosure or use of a trade secret without consent by someone who used improper means to acquire the knowledge, knew or had reason to know the trade secret was acquired under circumstances giving rise to a duty to maintain its secrecy, or knew or had reason to know the trade secret was derived from someone who owed such a duty. 'Improper means' includes theft, bribery, misrepresentation, breach of a duty to maintain secrecy, and espionage through electronic or other means. It does not include reverse engineering, independent derivation, or any other lawful means of acquisition. This framework creates an important dynamic: if a competitor independently develops the same information, there is no misappropriation. This is why proving the timeline of your development — through tools like immut — is critical for establishing that your trade secret existed before an alleged independent discovery.

Remedies and Damages

The DTSA provides comprehensive remedies: Injunctive Relief: Courts can issue injunctions to prevent actual or threatened misappropriation, provided they do not prevent a person from entering an employment relationship. Injunctions can include conditions on future activities, royalty payments, or affirmative steps to protect the trade secret. Damages: A trade secret holder can recover damages for actual loss caused by misappropriation and unjust enrichment not addressed by the actual loss award. In lieu of measuring damages by these methods, a court may impose a reasonable royalty for the misappropriator's use. Exemplary Damages: If the court finds wilful and malicious misappropriation, it may award exemplary damages of up to 2x the compensatory damages — a powerful deterrent. Attorney Fees: The court may award reasonable attorney fees to the prevailing party if a claim of misappropriation was made in bad faith, or if wilful and malicious misappropriation is proved.

The Ex Parte Seizure Provision

One of the most distinctive features of the DTSA is the ex parte seizure provision (18 USC 1836(b)(2)). In extraordinary circumstances, a trade secret holder can request a court to issue an order for the seizure of property necessary to prevent the propagation or dissemination of the trade secret — without prior notice to the alleged misappropriator. This provision is intentionally narrow. The applicant must demonstrate that an injunction would be inadequate, that immediate and irreparable injury will occur without seizure, that the person against whom the order is directed actually possesses the trade secret, the application describes the matter to be seized with reasonable particularity, and the harm to the applicant substantially outweighs the harm to the legitimate interests of the person against whom seizure is ordered. Courts have used this provision sparingly, consistent with Congressional intent. The provision includes safeguards: seized materials must be kept secure, the applicant must post security, and a hearing must be held within 7 days.

Whistleblower Immunity

The DTSA includes an important immunity provision for whistleblowers (18 USC 1833(b)). An individual cannot be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret made in confidence to a government official or attorney solely for the purpose of reporting or investigating a suspected violation of law. Employers are required to provide notice of this immunity in any contract or agreement with an employee that governs the use of a trade secret. Failure to provide this notice means the employer cannot recover exemplary damages or attorney fees against the employee in a trade secret action.

Key Provisions

Critical Provisions of the DTSA

Federal Jurisdiction (18 USC 1836(b)(1))

Creates a federal civil cause of action allowing trade secret holders to file in US District Court. Eliminates the need to rely solely on state courts and ensures nationally consistent standards.

Reasonable Measures Requirement

Trade secret holders must demonstrate they took reasonable measures to maintain secrecy. This is the most litigated element of DTSA claims — blockchain timestamps provide direct evidence of these measures.

Ex Parte Seizure (18 USC 1836(b)(2))

Allows seizure of trade secret materials without prior notice in extraordinary circumstances. Requires showing that injunctive relief would be inadequate and immediate irreparable harm would result.

Exemplary Damages (up to 2x)

Courts may award up to double the compensatory damages for wilful and malicious misappropriation, plus reasonable attorney fees — creating a powerful deterrent against deliberate trade secret theft.

Whistleblower Immunity (18 USC 1833(b))

Protects individuals who disclose trade secrets to government officials or attorneys for reporting suspected law violations. Employers must provide notice of this immunity in employment agreements.

3-Year Statute of Limitations

Actions must be commenced within 3 years of the date the misappropriation was discovered or should have been discovered. Timestamped documentation helps establish when trade secrets existed and when misappropriation occurred.

immut

How immut Supports DTSA Compliance

Document the 'reasonable measures' requirement with timestamped proof that you identified, classified, and protected trade secrets at specific dates.

Establish the existence and ownership of trade secrets before alleged misappropriation — critical for proving your claim timeline.

Create an auditable trail of confidentiality measures that federal courts can verify through blockchain records.

Support damages calculations by proving when trade secrets were developed and the investment made in creating them.

Provide evidence that information qualifies as a trade secret by showing it was treated as confidential from a specific date.

Strengthen ex parte seizure applications by demonstrating the existence and value of trade secrets with immutable timestamps.

FAQ

Frequently Asked Questions

What is the Defend Trade Secrets Act?

The DTSA is a 2016 federal law that creates a civil cause of action for trade secret misappropriation in US federal courts. It supplements (but doesn't replace) state trade secret laws, giving companies the option of bringing claims in federal court with nationally consistent standards.

How does the DTSA define 'reasonable measures'?

The DTSA doesn't provide a specific list. Courts examine the totality of secrecy efforts including access controls, NDAs, employee training, document labelling, digital security, and exit procedures. Blockchain timestamps from immut provide documented evidence of proactive identification and protection of trade secrets.

Can I use both DTSA and state law claims?

Yes. The DTSA explicitly does not preempt state trade secret laws. Many plaintiffs bring both federal DTSA claims and state UTSA claims in the same action. This provides maximum flexibility in litigation strategy and remedies.

What damages can I recover under the DTSA?

The DTSA allows recovery of actual losses, unjust enrichment, reasonable royalties, exemplary damages up to 2x for wilful misappropriation, and attorney fees. Total damages in DTSA cases have ranged from thousands to hundreds of millions of dollars.

How do blockchain timestamps support DTSA claims?

Blockchain timestamps from immut provide three critical pieces of evidence: (1) that the trade secret existed at a specific date, (2) that you took reasonable measures to protect it by documenting and timestamping it, and (3) the timeline of development and protection efforts. This evidence is admissible in federal court under the Federal Rules of Evidence.

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