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Lauren E. Maddente

New Federal Law Adds to Companies’ Trade Secret Arsenals

By December 29, 2016April 28th, 2020No Comments

If your business maintains trade secrets related to services or products intended for use across state lines, you may now have new remedies and a direct route to federal court in the event of misappropriation.

Wisconsin’s trade secret statute, § 134.90, has been in place for many years. It provides compensatory and potential punitive damages for trade secret misappropriation.

The state statute applies to trade secret thefts occurring in Wisconsin. It does not always apply to Wisconsin trade secrets misappropriated outside Wisconsin.

The new Defend Trade Secrets Act (DTSA) creates a civil cause of action for misappropriation if the trade secret relates to a product or service in commerce in more than one state. Because the DTSA does not preempt the Wisconsin statute, employers now have more options to explore in pursuing remedies in the event of trade secret misappropriation.

Because the DTSA creates original federal jurisdiction, Wisconsin businesses now have a direct path to federal court for the violation.

This may be particularly helpful in technical trade secret cases given many federal judges’ experience hearing patent and copyright cases.

The DTSA and the Wisconsin statute, though worded slightly differently, have similar content. The DTSA, however, differs in several respects.

One of the DTSA’s potentially most helpful and controversial provisions permits ex parte (without notice to the defendant) motions for an order seizing property necessary to prevent trade secret propagation or dissemination.

Also, while Wisconsin law allows a reasonable royalty only if there are no other means to prove damages above that amount, the DTSA allows a plaintiff to choose a reasonable royalty as its damage measure.

Finally, the DTSA provides immunity, under any federal or state trade secret law, for employees who disclose trade secrets solely for the purpose of reporting illegal activity to the government.

The DTSA requires employers to inform employees of this “whistleblower protection” as a condition to receiving punitive damages or attorney’s fees. Also, employers must include this notice in all confidentiality contracts that protect trade secrets entered into or revised after May 11, 2016. Failure to do so will prevent employers from recovering punitive damages or attorney’s fees under the DTSA.

Both statutes are available where trade secrets exist and such secrets are misappropriated. Without diligently identifying and protecting trade secrets, including through confidentiality policies, your business may be throwing away the laws’ protections.