California is the first state to grant a temporary restraining order (TPO) under the Defend Trade Secrets Act of 2016 (DTSA) since it was signed into law on May 11, 2016. The TPO was issued against a sales agent that violated federal and state trade secret laws and non-compete agreements. Allegedly, she downloaded confidential information onto her personal computer on the day that she resigned and went to work for a leading competitor. The restraining order prohibited the former employee from sharing the employer’s trade secrets or from using the confidential information she had downloaded in her new business ventures.
The plaintiff in the case filed suit in a California federal district court under the DTSA. He also filed an application for a TPO and seven state claims for violation of the California Uniform Trade Secrets Act and California Unfair Competition Law. Because the lawsuit was filed under the DTSA, the federal district court accepted the case and claimed jurisdiction over the state law violations as well. The court took into consideration the federal and state statutes when deciding to grant the TPO and hold the defendant to the non-compete and non-solicitation contractual agreements made with the former employer. Without the benefit of the DTSA, the case may never have been brought to the federal level.
How One Case Can Influence Subsequent Proceedings
Two weeks after the initial TPO was granted, the court ordered a temporary injunction after the defendant showed that her former clients were also existing customers of her new employer. She successfully argued that preventing her from contacting these clients would threaten her income and impede her success at her new job. The new order allowed the defendant to engage in business with customers that were served by both companies, but prohibited her from using trade secrets or confidential information from her former employer to increase her business profits with her new employer.
The precedents set by this initial case filed under the DTSA are important to note because they are influencing the decisions for future cases brought to the federal level. The initial concept of the DTSA was to bring trade secret cases to the federal courts, which was successfully demonstrated with this first case. The federal court’s decision to uphold federal and state trade secret laws in favor of the plaintiff while also protecting the business interests of the defendant will surely influence future cases brought before a federal judge under the DTSA.
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