DTSA at 10: Litigation Surges Amid Conflicting Rulings
A decade after its enactment, the Defend Trade Secrets Act has driven a surge in federal litigation but has not created a uniform national standard, with circuit splits on key issues like pleading and damages.
A decade after its passage, the Defend Trade Secrets Act (DTSA) has made federal court the primary forum for trade secret disputes but has not produced the single national standard Congress intended. Case filings have surged by over 30% since the law's first full year, but state law remains influential and key circuit splits have emerged.
Counsel must now navigate conflicting precedent on crucial issues. Courts are divided on how specifically a trade secret must be identified at the pleading stage, creating disparate standards for surviving a motion to dismiss. A second split involves damages, with the Second and Fifth Circuits disagreeing on whether a defendant’s "avoided costs" constitute recoverable unjust enrichment absent proof of the plaintiff's own quantifiable loss. The Supreme Court has denied certiorari on the issue.
Other key developments include the Seventh Circuit's expansion of the DTSA's extraterritorial reach and the statute's general permissiveness toward employee mobility compared to the "inevitable disclosure" doctrine available under some state laws. Emerging questions surrounding AI's impact on what is "readily ascertainable" and whether AI-generated output can be a trade secret will shape the next decade of litigation.