Ninth Circuit Allows 2016 Defend Trade Secrets Act to Apply Retroactively

Originally published by Peggy Keene.

Ninth Circuit Finds “Continued Use” Liability in DTSA Cases Allowing Retroactive Application

The Ninth Circuit made headlines last month when it decided, in Attia v. Google LLC, to allow a trade secrets claim for misappropriation apply retroactively despite the alleged misappropriation occurring before the 2016 enactment of the Defend Trade Secrets Act (“DTSA”), identifying a “continued use” provision for liability.

Differences Between DTSA and UTSA for Trade Secret Protection

The 2016 DTSA, §18 U.S.C. 1836, et seq., allows the owners of trade secrets to bring lawsuits in federal court when misappropriation of a trade secret has occurred.  The DTSA mirrors the Uniform Trade Secrets Act (“UTSA”) closely and also extends the Economic Espionage Act, which criminalizes the misappropriation of certain trade secrets.

While most states have adopted the UTSA, the DTSA is notable for giving whistleblowers legal immunity under federal law and is considered to be one of the most important intellectual property laws to be passed this century.  The first decision under the DTSA was Henry Schien, Inc. v. Cook, which was decided in the United States District Court for the Northern District of California.

Ninth Circuit Decides on Retroactive Application of DTSA Based On “Continued Use” Provision

Last month, the Ninth Circuit decided that a claim under the DTSA can still be brought, even if the misappropriation occurred before the enactment of the DTSA, as long as the misappropriation continued through DTSA enactment and involved the same trade secret.  Experts in the field expect other federal courts to follow the Ninth Circuit’s lead because it allows for extended protection of trade secrets and is in line with the spirit of the DTSA, which is discussed below.

Like Henry Schien, Inc. v Cook, the first case decided under the DTSA, Attia v. Google LLC began in the Northern District of California.  Attia v. Google LLC was originally filed in 2014 and was brought by an architect against Google under the DTSA, the Racketeer Influenced and Corrupt Organizations Act (“RICO”), and state trade secret and contract laws for misappropriation of Attia’s “Engineered Architecture” technology.  In its holding, the Ninth Circuit held that the DTSA could apply to trade secrets that were misappropriated before the 2016 enactment of the DTSA because the DTSA does not have the anti-continued use provision that is present in the UTSA despite Congress being aware of the UTSA.

As such, the Court surmised that the intentional omission of the UTSA’s anti-continued use provision indicated that Congress did not intend for DTSA to be limited in the same aspect as the UTSA.  In its reasoning, the Ninth Circuit pointed out that the DTSA language discussing “a continuing misappropriation constitutes a single claim of misappropriation” relates only to statute of limitations arguments and does not intrinsically prohibit a trade secrets misappropriation claim from being brought on the basis of continued use.  The Ninth Circuit’s reading significantly expands potential liability for defendants that have misappropriated trade secrets before the 2016 enactment of the DTSA if such misappropriation continues past the enactment of the DTSA and involves the same trade secret.

Key Takeaways on the Continued Use Provision Finding within the DTSA                                                                                                                                                                     

The Ninth Circuit’s decision in Attia v. Google LLC marks a significant shift in trade secrets law because:

• it allows for claims of trade secrets misappropriation to be brought under the DTSA even if the misappropriation began before the 2016 enactment of the DTSA;

• significantly expands potential liability for defendants of trade secrets claims; and

• extends federal protection where the Uniform Trade Secrets Act may not.

For more information on trade secret protection, see our IP Litigation Services and Industry Focused Legal Solutions pages.

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