Is A Defend Trade Secrets Act Seizure Order Rarer Than a Bears Super Bowl Victory?
Last year on May 11, 2016, the federal government waded into the trade secret pool and passed the Defend Trade Secrets Act. One of the unique features of the federal law that made it distinct from state laws and drew significant interest was the civil seizure order provision. That is, the DTSA allowed a plaintiff (usually a business alleging misappropriation of a trade secret) to ask a federal court for an order to seize property to stop the spread or use of a trade secret. However, a party asking for such an order has to demonstrate “extraordinary circumstances” that make the order necessary.
Now that it has been nearly a year since the DTSA become law, a seizure order under the DTSA is proving to be extraordinarily difficult to obtain. Take, for example, the recent decision in OOO Brunswick Rail Management v. Sultanov, 17CV0017 (N.D. Cali. Jan. 6, 2017). There, the plaintiff brought a trade secret lawsuit against former employees. The company alleged that the defendants were engaged in suspicious activity such as sending, deleting, and emptying the trash on a series of e-mail communications and communicating with parties that one defendant was explicitly prohibited from contacting. One defendant even refused to return a company-issued mobile phone and laptop.
Despite even the failure to return company property, the court did not grant the plaintiffs’ request for a seizure order under the DTSA. The issue stopping the court was the fact that the DTSA does not allow a seizure order where an injunction or restraining order under Federal Rule of Civil Procedure 65 is adequate. Here, the court’s order included requiring the defendant to turn over the devices at issue to the court at a future hearing date and prohibiting them from being accessed or modified in the meantime. (Note: the court later dissolved its temporary restraining order.)
Thus, it would seem from the OOO Brunswick Rail Management decision that the court was willing to rely on its command that a plaintiff preserve evidence to satisfy the concerns of the plaintiff seeking the seizure order. Most parties in the Seventh Circuit may encounter a similar response without an ability to demonstrate a unique concern. The Seventh Circuit Electronic Discovery Pilot Program generally promotes the use of “preservation orders” by courts in the principles listed in its proposed standing order.
Further, to the extent courts are granting requests to seize electronic devices, they are still relying on FRCP Rule 65 rather than the DTSA. For example, the Northern District of Indiana court in Magnesita Refractories Co. v. Mishra, upheld its own decision, on what essentially was a request to reconsider, to seize the laptop of an employee allegedly misappropriating trade secrets from his current employer. In an order of January 25, 2017, the court reasoned that its seizure order was appropriate under Rule 65 and rejected that the heightened requirements of the DTSA applied. For support, the court cited other decisions following passage of the DTSA in Earthbound Corporation v. MiTek USA, Inc. (W.D. Wash. Aug. 19, 2016) and Panera, LLC v. Nettles (E.D. Mo. Aug. 3, 2016).
So what is answer to this blog post title? Yes, a DTSA trade secret order appears to be rarer than the Chicago Bears lone Super Bowl title. When asked to seize electronic devices to preserve evidence related to allegations of trade secret misappropriation, courts prefer to rely on FRCP Rule 65 rather than the DTSA. While the DTSA provided a new way to secure property containing trade secret information, one year after its passage courts have been reluctant to rely on it to seize property. To obtain such an order under the DTSA, a party may need to be prepared to demonstrate that preservation is not enough and that permanent or long-term seizure is needed to make sure the trade secret stays protected and undisclosed. Thus far, no court appears to have been presented with facts to convince it a DTSA seizure order is appropriate.