The Defend Trade Secrets Act of 2016 (DTSA) was passed on April 4, 2016 by the US Senate, and on April 27, 2016 by the US House of Representatives and signed by the President. For the first time, there is a federal civil remedy for the misappropriation of trade secrets.
The purpose of the DTSA is to provide uniformity. An important part of the DTSA is that it does not preempt existing federal or state laws. State legislators continue to hold the power to adopt non-compete reform.
Alabama, Connecticut, Idaho, Oregon, and Utah recently enacted legislation. Massachussets came very close to passing a law restricting their use. In California they are unenforceable. Critics of the DTSA argue that the ex parte provision — a trade secret owner may request the court to order seizure of property without any prior notice to the other party — is vague and it may harm small businesses.
Legislators in Washington are moving towards change. Washington courts have generally permitted reasonable non-compete agreements.
A court will enforce a reasonable non-compete if it:
1) is reasonably necessary to protect the business or goodwill of a party;
2) does not impose upon the individual any greater restraint than is reasonably necessary to protect the business or goodwill; and
3) the public is not injured as a result of the loss of service and skill of the individ ual.
According to proponents of the recent house bill, non-competition agreements:
- are used too often
- cause waste
- inhibit individuals from moving between jobs
- are oppressive and
- expensive to challenge in court