Third Time's the Charm: Remedies Under the Federal Defend Trade Secrets Act

Posted By Godwin Bowman & Martinez || May 31, 2016

In this installment of our series detailing the key provisions of the FDTSA, we examine the remedies that the new federal statute gives to Texas businesses whose trade secrets are misappropriated.

Damages

Under the FDTSA, a trade secret owner may be awarded actual damages, including unjust enrichment damages or damages measured by a "reasonable royalty" resulting from misappropriation of a trade secret. In cases of willfull and malicious misappropriation, the trade secret owner may be awarded punitive damages as well. In addition, the FDTSA allows either party to recover attorneys' fees upon a showing of bad faith.

Injunctions

The FDTSA allows courts to issue temporary and permanent injunctive relief to prevent actual or threatened trade secret misappropriation. However, the FDTSA protects employee mobility by placing important limitations on injunctive relief against employees and former employees. First, under the FDTSA, a business may not acquire an injunction against an employee that prevents him or her from entering into a new employment agreement. Additionally, if the injunction places conditions on employment, the conditions must be based on evidence of threatened misappropriation rather than an employee's mere knowledge of a trade secret.

These limitations are in stark contrast to the approach taken in the "inevitable disclosure" jurisdictions, where courts may enjoin former employees from working at a new company based solely on the fact that the employee has knowledge of a prior employer’s trade secret. In contrast, the FDTSA makes it clear that trade secret owners must show evidence of an actual threat of trade secret misappropriation, rather than an employee's mere knowledge of the trade secret.

Ex Parte Civil Seizure Order

Finally, the FDTSA contains an ex parte civil seizure provision, which allows trade secret owners to obtain a court order to seize property in order to prevent trade secret misappropriation. This mechanism is reserved for extraordinary circumstances. For more detail on this section of the FDTSA, check out last week's post.

Leiza DolghihAlex CleeterLeiza 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.