Third Time's the Charm: How the Seizure Provision of the Federal Defend Trade Secrets Act Will Operate

Posted By Godwin Bowman & Martinez || May 17, 2016

For the past four weeks we have discussed the FDTSA as it moved through Congress. On May 11, 2016, President Obama finally signed the FDTSA into law. One of its most talked about features is the ex parte civil seizure provision, which is unprecedented in the world of trade secrets law, as none of the state trade secret statutes have this clause.

What it does

This powerful feature of the FDTSA allows businesses, in "extraordinary circumstances" to obtain an order from the court for the seizure of property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action. Such order may be obtained ex parte, i.e., without prior notice to the party whose property is being seized.

How it works

To obtain a seizure order, a business first must apply to the court. Then, a hearing must be held within seven days. Upon showing that there is immediate and irreparable harm and that the balance of the harm favors the party seeking the order, the court can issue a seizure order.

The order must provide for the narrowest seizure of property necessary to achieve the purpose of the order, and the seizure must be conducted in a manner that minimizes any interruption of the business operations of third parties and, to the extent possible, does not interrupt the legitimate business operations of the person accused of misappropriating the trade secret.

The seizure must be conducted by federal law enforcement officers, although state and local authorities may participate. Once the property is seized, it must be taken into the custody of the court.

What we can expect

What we know is that this tool is a powerful weapon for businesses to redress trade secret misappropriation and prevent further dissemination or use of such information by parties who obtain the information via improper means. The statute anticipates businesses' desire to apply the seizure provision broadly and, therefore, includes the language that places strict limits on the seizure provision's applicability. The FDTSA allows ex parte civil seizure only in extraordinary circumstances and upon a showing of specific facts justifying such a seizure. Courts will likely confront tensions between limiting the availability of ex parte seizures and ensuring that the provision is an effective tool to prevent trade secret misappropriation. It will be interesting to watch how courts will handle these tensions and how broadly they will apply the ex parte seizure provision.

Leiza DolghihAlex Cleeter Leiza Dolghih is a Senior Attorney in Godwin Bowman & Martinez's Unfair Competition, Trade Secrets and Copyright Section. She has over a decade of experience in commercial litigation and has handled multiple temporary restraining order and temporary injunction hearings in trade secrets lawsuits. LDolghih@GodwinLaw.com.

Alex Cleeter is an associate in Godwin Bowman & Martinez’s Commercial Litigation Section with experience in matters involving breach of fiduciary duty, breach of contract, employment, and OSHA issues. ACleeter@GodwinLaw.com.