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Pennsylvania Federal Court Explores the Contours of the DTSA

By: Kelly Muensterman

Recently, the U.S. District Court for the Eastern District of Pennsylvania determined a former employee did not violate the Defend Trade Secrets Act (“DTSA”) where she disclosed confidential information of her former employer to her husband and her attorney.

In Christian v. Lannett Company, Inc.,[1] plaintiff Wendy Christian sued her former employer, Lannett, alleging violations of Title VII, the ADA, and the FMLA. In response, Lannett counterclaimed, alleging Christian violated the DTSA by misappropriating Lannett’s trade secrets.  The DTSA defines a misappropriation of trade secrets where one discloses or uses another’s trade secret without the consent of the trade-secret owner.  However, the DTSA also provides immunity for the disclosure of a trade secret “in confidence…to an attorney…solely for the purpose of reporting or investigating a suspected violation of law.”[2]

Here, Lannett alleged that Christian violated the DTSA by disclosing Lannett’s trade secrets to (1) her husband and (2) her attorney. Christian moved to dismiss the DTSA claims. With regard to the alleged disclosure to her husband, Christian argued that any alleged disclosure predated the DTSA’s effective date and, thus, she did not violate the DTSA as a matter of law. The Court agreed, reasoning the DTSA does not provide for retroactive enforcement.

Similarly, Christian’s disclosure to her own attorneys in discovery -- coincidentally carried out one day after the DTSA’s effective date – also did not amount to a misappropriation under the DTSA.  Indeed, the “disclosure” of Lannett’s trade secrets was made to her own attorneys pursuant to a discovery order of the Court, and, further, Lannett had not pleaded any facts showing that Christian’s attorneys intended “to use or disclose the purported trade secrets they acquired to anyone other than Defendant, to whom the trade secrets belong.”

Though it is imperative for employers to protect their proprietary information and trade secrets, this case serves to remind employers to think carefully about their business objectives prior to raising DTSA claims.  Employers considering whether and how to best protect their trade secrets and proprietary information would do well to consult counsel. 

[1] No. 2:16-cv-00963-CDJ, E.D. Pa.

[2] 18 U.S.C. §1833(b).