As technology accelerates and electronic information theft becomes more difficult to detect and prevent, vigilant companies constantly look for ways to protect the trade secrets they consider their “crown jewels.” The passage of the Defend Trade Secrets Act of 2016 (DTSA) will help company management and counsel sleep better knowing that federal courts will be empowered to provide consistent, uniform trade secret protection across the country.

The House voted yesterday to pass the DTSA, which the Senate had unanimously passed.  President Obama is expected to sign it into law.

The DTSA amends the Economic Espionage Act of 1996 (EEA) by allowing plaintiffs to file civil lawsuits for trade secret misappropriation in federal court.  Thus, the DTSA provides an option to bring claims for misappropriation of trade secrets in federal court when federal jurisdiction would not otherwise exist. It also provides uniformity in the law regarding trade secrets at a federal level, and should result in the development of national case law in an area that is often viewed as patchwork at best. This consistency, along with the benefit of access to federal courts, is one of the main reasons company management strongly supported the DTSA.

Until the DTSA takes effect, state law will continue to largely govern civil claims related to theft of trade secrets. Because the DTSA does not pre-empt those state laws, even after the DTSA is enacted, companies will still have the option of pursuing state law claims either on their own in state court, or in federal court in conjunction with claims under the DTSA.

The most controversial aspect of the DTSA is a provision that allows courts, in “extraordinary circumstances,” to issue ex parte seizure orders in order to prevent dissemination of a trade secret. This means that a court can issue an order directing the “seizure of property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.” And, a federal judge can issue this seizure order with only the plaintiff present in court and without the defendant’s knowledge of the hearing or lawsuit. The DTSA also provides victims of wrongful seizures the ability to recover damages.

The enactment of the DTSA could shift the wave of trade secret litigation that has been gaining momentum across the country to the federal courts. If it rolls out as anticipated, companies previously facing uncertain results based on which jurisdiction the theft took place in will finally be able to have a higher level of comfort in making their strategic decisions with a better sense of knowing which rules will apply.