Pub. 9 2019 Issue 2

12 www.azbankers.org the court can dismiss the claim sua sponte , regardless of whether the opposing party has raised the issue. On the other side of the coin, if counsel is defending against a DTSA claim and the plaintiff has not alleged the nexus, counsel may want to direct the court’s attention to Congress’ express announcement of the interstate commerce provision as a “jurisdictional nexus.” 3. Continuing Misappropriation and Retroactive Application Another issue unique to the DTSA is whether it may be retroactively applied. The DTSA applies to “any misappropriation of a trade secret … for which any act occurs on or after the date of the enactment of [the] Act,” which was May 11, 2016. 25 But sever- al courts have held that DTSA claims may be based on misappropriation occurring before the DTSA’s enactment as long as the defendants continued to misappropriate the trade secrets after the enactment date. In Cave Consulting Group, Inc. v. Truven Health Analytics Inc. 26 – a 2017 decision from the U.S. District Court for the Northern District of California – the court noted that the DTSA contemplates three types of mis- appropriation: (1) acquisition, (2) disclosure, or (3) use. The court in Cave Consulting – like others – found that “[n]othing suggests that the DTSA forecloses a use-based theory [of misappropriation] simply because the trade secret being used was misappropriated before the DTSA’s enactment.” 27 Similarly, in Adams Arms, LLC v. Unified Sys., Inc. 28 – a 2016 decision from the U.S. District Court for the Middle District of Florida – the court refused to dismiss a DTSA claim based on trade secrets that were acquired before enactment of the DTSA but disclosed after enactment. In Ad - ams Arms , the plaintiff was a military rifle manufacture and the defendant a company seeking to supply rifles to the Peruvian military. After signing a nondisclosure agreement, the plaintiff provided its trade secret information to the defendant in 2014 and 2015. The defendant then allegedly used and divulged those trade secrets in securing a contract with the Peruvian military in May 2016 – shortly after the enactment of the DTSA. The court held that the plaintiff’s pre-enactment acquisition claim failed as a matter of law, but that the plaintiff’s post-en - actment disclosure claim was viable. Unlike in Adams Arms, the court in Avago Techs. U.S. Inc. v. Nanoprecision Products, Inc. 29 granted the defendant’s motion to dismiss the plaintiff’s DTSA claim, reject - ing the plaintiff’s contention that its claim was viable due to the defendant’s contin- ued disclosure of plaintiff’s trade secret after the DTSA’s enactment. In Avago, the plaintiff asserted a DTSA claim based on the defendant’s acquisition and subsequent disclosure of trade secrets in various patent applications. The Avago court dismissed the DTSA claim because the acquisition and initial disclosure of the trade secrets occurred before the enactment of the DTSA, which the court recognized was not retroactive in application. In rejecting the plaintiff’s continued misappropriation argument, the court reasoned, “Simply alleging that the same information was disclosed ‘again’ is not sufficient to avoid [dismissal] as ‘disclosure,’ by definition, implies that the information was previously secret.” 30 In bringing a DTSA claim based on trade secret misappropriation – acquisition, disclosure or use – occurring both before and after May 11, 2016, plaintiffs and their counsel should be sure to allege a continued misappropriation theory. Also, as demon- strated by Avago , if misappropriation is based on a disclosure theory, the complaint should highlight the differences and distinc - tions between the pre- and post-enactment trade secret disclosures. Remedies Available to Employers and Employees 1. Ex Parte Seizure Remedy Where the circumstances involve a signif- icant and substantial risk of trade secret misappropriation that would lead to irrep- arable injury, practitioners should consider bringing a cause of action under the DTSA instead of, or in addition to, a claim under Arizona’s Uniform Trade Secrets Act (“AUTSA”). Unlike the AUTSA, the DTSA authorizes courts to grant ex parte seizures of property when necessary to prevent the propagation or dissemination of a protected trade secret. 31 Pursuant to the statute, courts may only grant ex parte seizures “in extraordinary circumstances.” 32 In addition to other requirements specifically enumerated in the statute, the applicant must demonstrate that a preliminary injunction or tempo- rary restraining order under Rule 65 of the Federal Rules of Civil Procedure (“FRCP”) or another form of equitable relief would be inadequate. 33 In practice, most courts have strictly construed these limitations and have rarely granted ex parte seizure applica- tions. 34 However, courts have granted such property seizures where the plaintiff has adequately demonstrated that the defendant has engaged in or is likely to engage in bad faith conduct, such as destroying evidence, providing false or misleading information to the court, or refusing to comply with a court order pursuant to FRCP 65 or another equitable remedy. 35 However, bare allega- tions of misconduct are not enough. A plain- tiff must be able to point to specific instances of prior bad faith conduct. 36 Accordingly, where a client can point to specific instances of prior bad faith conduct relating to the alleged misappropriation, counsel should consider filing a claim under the DTSA instead of, or in addition to, a claim under the AUTSA, where an ex parte seizure remedy is wholly unavailable. 2. Whistleblower Immunity Although the ex parte seizure remedy is a palpable weapon for employers, the DTSA equips employees with a potential shield – whistleblower immunity. Unlike the AUTSA, the DTSA protects whistleblowers from civil and criminal liability for making limited disclosures of trade secrets to gov- ernment officials or attorneys for purposes of “reporting or investigating” a violation of law or in connection with a lawsuit alleging a violation of law. 37 Hopefully, most employers and employees Continued from Page 11