Hard as it may be to believe, the Defend Trade Secrets Act of 2016 (“DTSA”) is nearly five years old. Trade secret misappropriation claims have been on the rise since the enactment of the DTSA. Courts continue to grapple with some longstanding issues—like the importance of properly identifying a trade secret and the types of damages available in DTSA cases—and the COVID-19 pandemic also presented new challenges related to an increasingly remote and mobile workforce. We summarize these trends below, and you can find our previous advisories on this topic here.
Differences Between DTSA and State Law Claims—Extraterritorial Reach and Damages
The DTSA exists alongside state-level protections embodied in the Uniform Trade Secrets Act (“UTSA”), which has been adopted in all states except New York (which continues to follow a common law approach). Many plaintiffs continue to assert both types of claims in their lawsuits. Although the two bodies of law are similar—with early DTSA cases drawing heavily on UTSA decisional law—there are key differences.
The ability to sue for acts of foreign misappropriation is one key difference. A growing number of courts have interpreted the DTSA to apply extraterritorially where: “(1) the offender is a natural person who is a citizen or permanent resident alien of the United States, or an organization organized under the laws of the United States or a State or political subdivision thereof; or (2) an act in furtherance of the offense was committed in the United States.” Many of these same courts, however, have not come to the same conclusion with respect to misappropriation claims brought under state trade secret laws.
A second important difference is the types of damages that are available. Both the DTSA and UTSA provide three measures of damages: 1) the actual loss caused by the misappropriation; 2) any unjust enrichment caused by the misappropriation; or 3) a reasonable royalty for the unauthorized disclosure or use of the trade secrets. Nevertheless, damages can vary significantly based on whether they are awarded under the DTSA or under state trade secret laws because courts have been increasingly willing to interpret the DTSA to award damages that may not be available under state law.
For example, recent decisions have acknowledged that, under the DTSA, a plaintiff may seek damages resulting from extraterritorial conduct. In addition, courts have concluded that avoided costs may be a viable basis for awarding unjust enrichment damages under the DTSA; however, such damages are not always available for claims brought under state law.
Federal Courts Continue To Focus On Properly Identifying A Trade Secret
The existence of a valid trade secret is the cornerstone of any misappropriation case. While the DTSA’s definition of a “trade secret” is quite broad, a plaintiff must allege (1) that it possessed secret information, (2) that is reasonably protected, and (3) that derives independent economic value from its secrecy. This seemingly simple test remains a stumbling block for plaintiffs because they are simultaneously faced with competing interests: disclosing enough information to state a claim with the particularity required by federal pleading rules on the one hand, while keeping the confidential information itself secret on the other. And while a plaintiff may seek to file documents pertaining to the alleged trade secret under seal, such requests are not always granted.
The Sedona Conference recently tried to provide some clarity and guidance for pleading trade secrets:
- First, “[t]he identification of an asserted trade secret during a lawsuit is not an adjudication of the merits and is not a substitute for discovery.”
- Second, the party bringing a claim for misappropriation “should identify in writing the asserted trade secret at an early stage of the case.”
- Third, the party claiming misappropriation of a trade secret “must identify the asserted trade secret at a level of particularity that is reasonable under the circumstances.”
- Fourth, “[t]he identification of an asserted trade secret may be amended as the case proceeds.”
While these principles largely track case law that evolved over the past five years, litigants and courts continue to grapple with these issues. For instance, in TLS Management & Marketing Services, LLC v. Rodriguez-Toledo, the First Circuit reversed summary judgment for the plaintiff when “the alleged trade secrets were not identified … until the eve of trial.” The First Circuit also held that the plaintiff’s descriptions were too general to establish a valid and protectable trade secret, explaining that the plaintiff “made no showing as to what aspects of the [asserted trade secrets] were public knowledge and which were not.”
The District of Delaware’s recent decision in Lithero, LLC v. Astrazeneca Pharmaceuticals LP highlights the dangers of failing to specifically identify trade secrets in the pleading. The court dismissed a DTSA claim, observing that the complaint merely “points to large, general areas of information that Plaintiff alleges to have shared with Defendant, but does not identify what the trade secrets are within those general areas.” This was insufficient because, as the court explained, “[w]ithout knowing, for example, what about [the training process at issue] is a trade secret, Defendant is not put on sufficient notice of what it is accused of misappropriating.” 
Several other recent cases concerning establishing the existence of a trade secret are worth noting. First, in Inteliclear, LLC v. ETC Global Holdings, Inc., the Ninth Circuit addressed a plaintiff’s burden to properly identify an asserted trade secret prior to discovery. Typically, courts require a plaintiff to identify the asserted trade secret with reasonable particularity before commencing discovery, and the Ninth Circuit recognized that the plaintiff bore the burden of identifying the alleged trade secret with sufficient particularity. The plaintiff in this case described some components of their alleged trade secrets but left open the possibility that discovery could demonstrate that the defendants misappropriated other trade secrets. The Ninth Circuit ruled that the plaintiff had adequately identified one trade secret, that this was sufficient to survive a pre-discovery summary judgment motion, and that the plaintiff was permitted to further refine (or add to) the nature or scope of the trade secrets allegedly misappropriated after discovery. The court reasoned: “At this stage, particularly where no discovery whatsoever had occurred, it is not fatal to [plaintiff’s] claim that its hedging language left open the possibility of expanding its identifications later. [Plaintiff’s] burden is only to identify at least one trade secret with sufficient particularity to create a triable issue.” The Ninth Circuit thus demonstrated a willingness to allow flexibility in identifying trade secrets as a case proceeds as long as the plaintiff adequately identifies at least one trade secret at the outset of the case.
In another recent decision, the Northern District of California addressed whether the plaintiff, a global crypto currency exchange company, adequately pled that its physical address constituted a valid and protectable trade secret under the DTSA. The court initially dismissed the DTSA claim because the initial complaint failed to allege how plaintiff’s competitors would gain an economic advantage by learning its physical address. Plaintiff amended its complaint, and the court upheld the amended complaint based on allegations that “‘[s]ecurity is among the leading factors that consumers consider when selecting a trading platform, that a competing cryptocurrency exchange was the victim of hackers who stole approximately $5 million in Bitcoin from that exchange’s customers, and that other companies have been similarly targeted by hackers.” The court concluded that, under these circumstances, the amended complaint sufficiently pled a trade secret.
Increases In Remote Work Pose New Challenges And Concerns for Trade Secret Holders
Perhaps the most significant development this past year has been the COVID-19 pandemic, which catapulted employees and employers alike into company-wide remote work. Increases in remote work, and employee turnover in this environment, may lead to increased dispersion of confidential or proprietary information. This in turn complicates efforts to safeguard trade secrets.
A recent case out of the Delaware Chancery Court highlights the importance of maintaining traditional trade secret protection protocols in an increasingly remote world. The plaintiffs in Smash Franchise Partners, LLC v. Kanda Holdings, Inc. ran a mobile trash compaction business and sold franchises. They filed suit and sought a business-stopping preliminary injunction alleging that the defendants feigned interest in purchasing a franchise in order to gain access to plaintiffs’ trade secrets and other confidential information, which they then used to form their own competing mobile trash compaction business.
The court concluded that the plaintiffs failed to show a reasonable likelihood of success on the merits of their misappropriation claim because they did not take reasonable steps to protect their trade secrets. The plaintiffs had hosted a series of informational Zoom calls for potential franchisees using the company’s Zoom account and gave out the Zoom information for those calls to anyone who had expressed interest in a franchise and who had completed an introductory call with one of plaintiffs’ employees. Plaintiffs used the same Zoom meeting code for all meetings, did not require Zoom participants to enter a password, and did not use the waiting room feature to screen participants. In other words, anyone who had expressed interest and received the Zoom code could join the calls, and participants could freely share the code with others. In addition, although an employee of plaintiffs was supposed to take roll call at the beginning of each Zoom meeting and remove anyone not authorized to attend, plaintiffs failed to follow this procedure. The record showed that there were at least 20 Zoom meeting participants who could not be identified, and there was no evidence that these individuals had signed non-disclosure agreements. These deficiencies in on-line security proved fatal to plaintiffs’ trade secrets claim.
The trend toward remote work and increased employee turnover is not an entirely new development. We began to see a shift towards an increasingly mobile U.S. workforce over the past decade and a half. However, a year of remote work for many likely accelerated this trend exponentially. Holders of trade secrets should ensure that they are taking adequate steps to protect confidential and proprietary information in this brave new world, especially because such information may be stored, displayed, used, or discussed in locations and environments beyond their traditional control. Trade secret holders can leverage their existing technology to identify information to be protected, control who has access to such information, and signal its confidentiality. Trade secret holders also should continue to require and enforce non-disclosure agreements, conduct employee on-boarding and exiting training addressing confidentiality and security protocols, and take steps to ensure that lapses in those protocols are quickly detected and corrected. Finally, trade secret holders should inform employees that the access, use, and copying of documents is monitored, and then actually monitor that activity.
The DTSA has been heavily litigated over the past five years, but the case law interpreting it is far from definitive. We anticipate that the uptick in federal trade secret litigation will continue in the coming years and that the law will continue to evolve, making it imperative that trade secret holders and their counsel keep abreast of this shifting legal landscape. As we are faced with a more remote and mobile workforce, it is increasingly important that trade secret holders remain mindful of the nuances of both the DTSA and state trade secret laws to ensure they take steps to protect their trade secrets before they walk out the door.
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 Defend Trade Secrets Act of 2016, Pub. L. No. 114-153, 130 Stat. 376.
 See Stout, 2020 Trends in Trade Secret Litigation Report at 6 (Apr. 2, 2020), https://www.stout.com/en/insights/report/trends-in-trade-secret-litigation-report-2020.
 18 U.S.C.§ 1837.
 See, e.g., Motorola Sols., Inc. v. Hytera Commc’ns Corp., Ltd., 436 F. Supp. 3d 1150, 1163, 1170 (N.D. Ill. 2020) (holding that: (1) the DTSA applies extraterritorially if either of the requirements of 18 U.S.C.§ 1837 are met, but (2) the Illinois Trade Secret Act does not have extraterritorial reach); vPersonalize Inc. v. Magnetize Consultants Ltd., 437 F. Supp. 3d 860, 878-79 (W.D. Wash 2020) (dismissal of plaintiff’s DTSA claim not warranted since “the DTSA civil enforcement provision may be applied to a foreign entity” or where “an act in furtherance of the offense was committed in the United States” but dismissing Washington Uniform Trade Secret claim since Washington law does “not apply extraterritorially when neither party is a Washington resident and the acts giving rise to the claim occurred outside of Washington”); Medimpact Healthcare Sys. v. IQVIA Inc., No. 19cv1865-GPC(LL), 2020 U.S. Dist. LEXIS 155996, at *44 (S.D. Cal. Aug. 27, 2020) (“The DTSA also applies to conduct occurring outside the United States if (1) the offender is a . . . organization organized under the laws of the United States or a State or (2) an act in furtherance of the offense was committed in the United States.” (internal quotation marks omitted)); Inventus Power, Inc. v. Shenzhen Ace Battery Co., No. 20-cv-3375, 2020 U.S. Dist. LEXIS 122347, at *22 (N.D. Ill. July 13, 2020) (holding that plaintiffs had “a likelihood of establishing the extraterritorial reach of the DTSA, but not the ITSA, to the misappropriation alleged”).
 18 U.S.C. § 1836(b)(3)(B); Unif. Trade Secrets Act § 3(a) (Unif. Law Comm’n 1985).
 See, e.g., Motorola Sols., Inc, 436 F. Supp. 3d at 1166 (holding plaintiffs “may argue for extraterritorial damages resulting from the misappropriation, but only those damages that occurred after the effective date of the statute”).
 See, e.g., Syntel Sterling Best Shores Mauritius Ltd. v. Trizetto Grp., No. 15 Civ. 211 (LGS), 2020 U.S. Dist. LEXIS 191363, at *6 (S.D.N.Y. Oct. 15, 2020) (permitting expert testimony “about avoided cost damages only to the extent relevant to the DTSA claim” and foreclosing “testi[mony] about such damages to the extent exclusively relevant to the New York misappropriation of trade secrets claim”).
 See 18 U.S.C. § 1839(3).
 See, e.g., Inteliclear, LLC v. ETC Global Holdings, Inc., 978 F.3d 653, 658 (9th Cir. 2020) (“To prove ownership of a trade secret, plaintiffs must identify the trade secrets and carry the burden of showing they exist. The plaintiff should describe the subject matter of the trade secret with sufficient particularity to separate it from matters of general knowledge in the trade or of special knowledge of those persons…skilled in the trade…. Identifying trade secrets with sufficient particularity is important because defendants need concrete identification to prepare a rebuttal. Courts and juries also require precision because…the district court or trier of fact will not have the requisite expertise to define what the plaintiff leaves abstract.” (internal quotation marks and citations omitted)); Lithero, LLC v. Astrazeneca Pharms. LP, No. 19-2320-RGA, 2020 U.S. Dist. LEXIS 145592, at *4 (D. Del. Aug. 13, 2020) (“Without knowing, for example, what about [the training process at issue] is a trade secret, Defendant is not put on sufficient notice of what it is accused of misappropriating.”); see also, e.g., TLS Mgmt. & Mtkg. Servs., LLC v. Rodriguez-Toledo, 966 F.3d 46, 52 (1st Cir. 2020) (trade secrets are different from other forms of intellectual property in that “the defendant is not necessarily on notice of the trade secret before litigation,” which “raises the possibility that the trade secret owner will tailor the scope of the trade secret in litigation to conform to the litigation strategy” and explaining that under Puerto Rico’s Trade Secret Act, which is based upon the UTSA, “the plaintiff, before discovery of proof, shall describe the trade secret as specifically as possible, but without disclosing the same”).
 Compare Uniloc 2017 LLC v. Apple, Inc., 964 F.3d 1351, 1363 (Fed. Cir. 2020) (affirming denial of sealing requests that were overbroad and unsupported even though the requests were later narrowed), with Magnesium Mach., LLC v. Terves, LLC, No. 20-3779, 2020 U.S. App. LEXIS 38798, at *2-3 (6th Cir. Dec. 10, 2020) (explaining that “the existence of a trade secret will…generally satisfy a party’s burden of showing a compelling reason for sealingdocuments” while leaving open the possibility that if the information at issue turned out not to be a trade secret, the information would be unsealed at a later date).
 The Sedona Conference, Commentary on the Proper Identification of Asserted Trade Secrets in Misappropriation Cases, 22 Sedona Conf. J. 223, 231 (forthcoming 2021).
 TLS Mgmt. & Mtkg. Servs., LLC, 966 F.3d at 52.
 Id. at 54.
 Lithero, LLC, 2020 U.S. Dist. LEXIS 145592, at *4.
 Inteliclear, LLC v. ETC Global Holdings, Inc., 978 F.3d 653, 658 n.1 (9th Cir. 2020).
 Id. at 659.
 See Payward, Inc. v. Runyon, No. 20-cv-02130-MMC, 2020 U.S. Dist. LEXIS 173907, at *6 (N.D. Cal. Sept. 22, 2020).
 Payward, Inc. v. Runyon, No. 20-cv-02130-MMC, 2021 U.S. Dist. LEXIS 14638, at *7 (N.D. Cal. Jan 25, 2021) (internal quotation marks omitted).
 Smash Franchise Partners, LLC v. Kanda Holdings, Inc., No. 2020-0302, 2020 Del. Ch. LEXIS 263, at *1-2 (Del. Ch. Aug. 13, 2020).
 Id. at *42-43.
 See Stout, 2020 Trends in Trade Secret Litigation Report at 21 (Apr. 2, 2020), https://www.stout.com/en/insights/report/trends-in-trade-secret-litigation-report-2020.
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