S.D.N.Y. Applies Defend Trade Secrets Act to Conduct Predating the Statute

The Defend Trade Secrets Act (DTSA), signed into law by President Obama on May 11, 2016, applies “to any misappropriation of a trade secret . . . for which any act occurs on or after the date of the enactment of this Act.” 18 U.S.C. 1836(e). On its face, this would seem to preclude actions based on misappropriation that occurred prior to the DTSA’s enactment. But a recent case from the Southern District of New York shows that it’s possible to sue under the DTSA based on conduct predating the statute’s enactment.

In Syntel Sterling Best Shores Mauritius Limited v. TriZetto Group, Inc., the plaintiff, a healthcare software company, sued a company that previously contracted with the plaintiff to provide software development and other services. According to the plaintiff, after the defendant terminated the parties’ master services agreement, the defendant accessed and downloaded the plaintiff’s confidential documents and used that information to pitch clients. The plaintiff sued for violations of the DTSA, among other claims.

The defendant moved to dismiss, arguing that the amended complaint alleged pre-DTSA conduct. The court rejected this argument:

The plain language of the Act defines misappropriation to include “disclosure or use of a trade secret without the consent of another.” 18 U.S.C. 1839(5) (emphasis added). Accordingly, as Defendants allege that Syntel continues to use its Intellectual Property to directly compete with Trizetto, the wrongful act continues to occur after the date of the enactment of DTSA.

Thus, according to the Southern District of New York, a plaintiff can bring a claim under the DTSA for using a trade secret prior to the DTSA’s enactment, as long as the use continues post-enactment.

Takeaway: Companies who discover misappropriation that began before May 11, 2016 need to investigate whether the defendant continues to use the trade secrets at issue. If continued use can be alleged in good faith, consider bringing a claim under the DTSA.

Syntel v. TriZetto

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  1. Pingback: Almost 6 Months In, What Have We Learned About the Defend Trade Secrets Act? | Protecting Trade Secrets

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