What Is the Defend Trade Secrets Act?

Quick answer: The Defend Trade Secrets Act (DTSA) is a federal law enacted in 2016 that gives businesses the right to sue for trade secret misappropriation in U.S. federal court. It provides powerful remedies — including injunctions, damages, and emergency seizure orders — to help companies protect proprietary information from theft.

Trade secrets are some of the most valuable assets a business can own — think proprietary formulas, customer lists, and internal processes. Before 2016, companies that wanted to sue for trade secret theft had to rely on a patchwork of state laws that varied significantly in scope and enforcement. The Defend Trade Secrets Act changed that by creating a unified federal standard for protecting trade secret rights.

Here’s what business owners and entrepreneurs need to know, and how Emerson Thomson Bennett can help.

What Is the Defend Trade Secrets Act, and Why Was It Enacted?

The Defend Trade Secrets Act (DTSA) is a federal statute signed into law on May 11, 2016. It amended the Economic Espionage Act of 1996 to create a private civil cause of action for trade secret misappropriation at the federal level.

Before the DTSA, victims of trade secret theft had to bring claims under state law — most commonly the Uniform Trade Secrets Act (UTSA), which has been adopted in some form by 48 states. The problem? State laws are inconsistent. What qualifies as a trade secret in one state may not meet the threshold in another. Federal courts also offer advantages in terms of national reach, resources, and the ability to handle cross-border disputes more effectively.

The DTSA filled that gap by giving rights-holders a direct path to federal court.

Key Provisions of the Defend Trade Secrets Act

Does the DTSA Give You Access to Federal Court?

Yes  — and that’s one of its most significant features. The DTSA provides a private right of action, meaning any company or individual whose trade secrets have been misappropriated can file a civil lawsuit directly in U.S. federal court. 

This is a major departure from the pre-2016 landscape, where federal courts only handled trade secret cases involving criminal conduct or interstate commerce under narrow circumstances.

What Is an Ex Parte Seizure Order Under the DTSA?

In cases of imminent or ongoing theft, the DTSA allows courts to issue an ex parte seizure order — a court-ordered seizure of property or data before the defendant is even notified. This is an extraordinary remedy, available only when the applicant can demonstrate immediate and irreparable harm. It’s particularly useful when a departing employee or third party is about to transfer or delete confidential information.

How Long Do You Have to File a Trade Secret Claim?

Under the DTSA, plaintiffs have three years from the date the misappropriation was discovered — or reasonably should have been discovered — to file a lawsuit. Missing this window can permanently bar a claim, so acting quickly when theft is suspected is critical.

Whistleblower Immunity and Employer Obligations Under the DTSA

Who Is Protected by the DTSA’s Whistleblower Immunity Provision?

The DTSA includes an important whistleblower immunity provision. Individuals who disclose a trade secret confidentially to a government official or attorney — solely for the purpose of reporting a suspected legal violation — are immune from civil or criminal liability under both federal and state trade secret laws.

What Must Employers Include in Their Contracts?

Employers are required to include notice of this whistleblower immunity in any contract or agreement that governs the use of trade secrets or confidential information. This includes nondisclosure agreements (NDAs), employment contracts, and contractor agreements.

What Happens If an Employer Fails to Provide This Notice?

Failing to include the required whistleblower notice carries a concrete penalty: the employer forfeits the right to recover exemplary damages and attorney’s fees in any subsequent lawsuit against that employee. For businesses that heavily rely on trade secret protections, this is a costly oversight.

Remedies Available Under the Defend Trade Secrets Act

When misappropriation is proven, courts can award several forms of relief:

• Injunctive Relief: Courts may issue orders to stop ongoing or threatened misappropriation or to impose conditions on how a party may use the disputed information going forward.
• Actual Damages: Plaintiffs can recover compensation for their actual losses, as well as any unjust enrichment the defendant gained through misappropriation.
• Reasonable Royalty: Where damages are difficult to quantify, courts may award a reasonable royalty for the unauthorized use of the trade secret.
• Exemplary Damages: In cases of willful and malicious misappropriation, courts can award punitive damages up to twice the amount of actual damages.
• Attorney’s Fees: In cases involving willful misappropriation or bad-faith claims, attorney’s fees may also be awarded.

Protecting Your Trade Secrets Starts with the Right Legal Support

The DTSA gives businesses a powerful tool for protecting their most sensitive information — but only if they know how to use it. From drafting compliant NDAs to responding swiftly when theft occurs, proactive legal planning under federal and state trade secret laws can mean the difference between protecting your competitive advantage and losing it entirely.

If you’re a business owner or entrepreneur with trade secrets worth protecting, the attorneys at ETB Law are here to help. Contact ETB Law today to discuss how to safeguard your proprietary information and respond effectively if misappropriation occurs.

Frequently Asked Questions About the Defend Trade Secrets Act

What types of information qualify as trade secrets under the DTSA?

Under the DTSA, a trade secret is any information that has economic value because it is not generally known or accessible, and that the owner has taken reasonable steps to keep secret. This can include formulas, methods, customer lists, financial data, and software.

Can the DTSA be used alongside state trade secret laws?

Yes. The DTSA does not preempt state trade secret laws, meaning plaintiffs can bring claims under both federal and state law simultaneously. This can expand the remedies available depending on the jurisdiction.

Does the DTSA apply to international trade secret theft?

The DTSA can apply when misappropriation occurs outside the United States if the offender is a U.S. person or organization, or if an act in furtherance of the offense occurred inside the country.

Do small businesses need to worry about the DTSA’s notice requirements?

Yes. The obligation to include whistleblower immunity language in employee contracts applies to businesses of all sizes. Failing to do so — even as a small business — can eliminate your right to exemplary damages and attorney’s fees in a future lawsuit.