More than eight months elapsed since the federal Defend Trade Secrets Act (“DTSA”) went into effect in May 2016. This and the beginning of a new year led to me to check into how the courts applied one aspect of the statute that initially caused alarm for some people.
The DTSA authorizes a court “in extraordinary circumstances” – with no prior notice to the Defendant (i.e., ex parte) – to issue an order directing seizure of property to the extent necessary to prevent “the propagation or dissemination” of a Plaintiff’s trade secrets. In other words, the DTSA authorizes seizure of a Defendant’s property (computers, cell phone, etc….) in extreme cases where evidence exists that upon learning about the lawsuit the Defendant would either (a) conceal or destroy evidence of the theft of a Plaintiff’s trade secrets or (b) publish or transfer the Plaintiff’s trade secrets to another.
The seizure remedy in the DTSA led to articles discussing whether plaintiffs would use the remedy as a tool to pressure defendants into settling lawsuits. For example, a plaintiff might obtain a court order seizing a defendant business’ computer servers. This would effectively shut some businesses down.
At least thus far, this fear has not turned into reality. I have only been able to locate two federal court opinions considering plaintiffs’ requests for ex parte seizure under the DTSA. Neither court granted the request.
One court declined to grant the seizure request without permitting the defendant to respond, but indicated that the court would hold a hearing on the seizure application on an expedited basis after the defendant received the lawsuit. The other court provided protection to the plaintiffs in a manner slightly less invasive to the defendants. The court denied the DTSA seizure request, but issued a temporary restraining order prohibiting the defendants from accessing or modifying certain cell phones and laptops. The court also instructed the defendants to deliver the devices to the court at a preliminary injunction hearing scheduled to occur two weeks later.
The two court opinions mentioned above are: Dazzle Software II, LLC v. Kinney, No. 16-12191 (E.D. Mich. June 15, 2016); OOO Brunswick Rail Management v. Sultanov, No. 5:17-cv-00017-EJD, 2017 WL 67119 (N.D. Ca. January 6, 2017).