As noted in our May 2016 client alert, President Obama signed the Defend Trade Secrets Act (DTSA), which establishes a federal cause of action for misappropriation of trade secrets into law. As part of its protections, the DTSA provides an immunity defense for lawful disclosures (as defined by the law), including disclosures to an attorney for the sole purpose of reporting or investigating a suspected legal violation. On December 6, 2016, a federal court in Massachusetts clarified the burden associated with asserting the immunity defense in a DTSA action. Unum Group v. Loftus, Case No. 16-cv-40154 (D. Mass.).
The employer brought suit against its employee for misappropriation of trade secrets under the DTSA after the employee allegedly was caught on surveillance footage: (1) “leaving [the office] with two boxes and a briefcase”; (2) two days later “exiting the building … with a shopping bag full of documents”; and (3) two days after that “leaving [the employer’s] office with his company laptop and a shopping bag which appeared to be full.” The employer allegedly tried to work with the employee to return the documents to no avail and instead filed suit, and sought a preliminary injunction. The employee moved to dismiss, claiming “he turned over the documents he removed from [the employer] to his attorney to report and investigate a violation of law, and is therefore immune from any liability for trade secret misappropriation” under the DTSA.
Denying the employee’s motion to dismiss, the court noted that the “record lack[ed] facts to support or reject [the employee’s] affirmative defense at this stage of the litigation.” The court found that the following facts weighed against granting the employee’s motion to dismiss: (1) the employee had not yet filed a lawsuit regarding unlawful activity by the employer; (2) there had been no discovery regarding the significance of the documents taken by the employee; and (3) “it is not ascertainable from the complaint whether [the employee] turned over all of [the employer’s] documents to his attorney, which documents he took and what information they contained, or whether he used, is using, or plans to use, those documents for any purpose other than investigating a potential violation of law.”
This case represents a meaningful development of the law under the DTSA, as it provides some insight as to the type of evidence that courts will assess when considering the propriety of the immunity defense in DTSA actions and the likelihood of early disposition of an action by asserting this defense.