(This is part of the Restrictive Covenant Report “Employers’ Toolbox Series,” where we examine lesser-utilized methods of protecting confidential information, trade secrets, and other business interests.)
The Defend Trade Secrets Act (“DTSA”), 18 U.S.C. § 1836, et seq., is approaching its fifth anniversary after being signed into law by President Barack Obama on May 11, 2016. To celebrate, we are highlighting some of the issues that have developed in five years of litigating the law’s most notorious feature: ex parte seizure orders.
As we wrote just before the DTSA was signed into law, the ex parte seizure provision has always been controversial. Under the DTSA, an ex parte seizure order permits immediate confiscation of private devices like desktop computers, laptops, smartphones, or tablets without any advance notice to the device owner, and on the strength of the applicant’s evidence only. Once granted, the order is served and executed by U.S. Marshalls or other law enforcement officers, similar to a criminal search warrant.
In the five years since the passage of the DTSA, a small but growing body of case law is developing on some important procedural and practical issues arising from ex parte seizure.
- Moving to Have the Ex Parte Seizure Application Filed Under Seal
The DTSA contains detailed instructions for obtaining an ex parte seizure order. Because of the high evidentiary threshold needed for such extraordinary relief, applicants almost always will need to present documentary evidence along with the required affidavit or verified complaint. Critically, the DTSA does not permit entry of an ex parte seizure order unless the court finds that the applicant “has not publicized the requested seizure.” 18 U.S.C. § 1836(b)(2)(A)(ii)(VIII).
The DTSA does not define the term “publicized.” It is unclear whether filing seizure application materials on the public docket could constitute “publicizing” them. Perhaps in an abundance of caution, many applicants simultaneously move to have the seizure application materials filed under seal. Several courts have concluded that the applicant “has not publicized” the requested seizure where the application materials were filed under seal. See, e.g., Shumway v. Wright, No. 4:19-cv-00058-DN-PK, 2019 U.S. Dist. LEXIS 148882 (D. Utah Aug. 26, 2019); Thoroughbred Ventures, LLC v. Disman, No. 4:18-cv-00318-ALM, ECF No. 6 (E.D. Tex. May 1, 2018).
However, applicants should not treat the motion to seal as a mere formality. If the applicant fails to meet the legal requirements for filing under seal, that motion could be denied, and in turn could jeopardize the request for emergency relief. See Corelogic Sols., LLC v. Geospan Corp., No. SACV 20-01500-CJC(KESx), 2020 U.S. Dist. LEXIS 246349, at *9 (C.D. Cal. Aug. 21, 2020) (denying motion to seal an application for a temporary restraining order where the applicant did not make a “document-by-document” showing of “good cause” to merit protection of alleged trade secret information from public disclosure).
- Seeking a TRO as a Backup to DTSA Seizure
Understandably, the DTSA sets a very high bar for ex parte seizure—higher, even, than the standard to obtain an ex parte temporary restraining order. But these are not mutually exclusive remedies.
Even if a court denies the applicant’s motion for ex parte seizure under the DTSA, the court still can grant a motion for a temporary restraining order preventing the defendant from taking potentially harmful actions. See Cochrane USA, Inc. v. Filiba, No. 18-341 (EGS), 2018 U.S. Dist. LEXIS 185726, at *9-10 (D.D.C. Mar. 9, 2018) (denying a motion for ex parte seizure under the DTSA because the applicant failed to establish “extraordinary circumstances” justifying seizure, but granting a motion for temporary restraining order preventing the defendants from “destroying, altering, modifying, forwarding, utilizing, disposing of, or in any other manner changing/altering or dismantling” the applicant’s data).
Temporary restraining orders are still powerful remedies that can be requested in the alternative to or in conjunction with ex parte seizure under the DTSA. Indeed, even prior to the enactment of the DTSA, temporary restraining orders, including, if warranted, ex parte orders allowing for immediate seizure of electronic media by U.S. Marshalls or other law enforcement officers, were a valuable tool. Although difficult to obtain and only applicable in limited circumstances, such orders remain an effective substitute for the DTSA’s more rigid seizure protocol.
Unsurprisingly, trade secret litigation has increased since the DTSA’s enactment. New issues relating to the controversial ex parte seizure provision will certainly crop up as more cases are filed. We will continue to monitor developments in this area of the law, and we will update the blog with new insights as they arise.