Keep Your Enemies Closer: Part 2

In my last article I addressed representative Defend Trade Secrets Act [hereinafter ‘the Act’] decisions in which the courts evaluated threatened or inevitable misappropriation. In this article we look at the judicial conclusions that justify an ex parte seizure of privately-owned property upon premises outside the courtroom. This seizure is possible because the Act authorizes law enforcement officials to enter a physical premise without notice and seize property which may contain trade secrets. However extraordinary circumstances must exist for which a Federal Rule of Civil Procedure 65 order would be inadequate [hereinafter Rule 65].

According to the case law to date, such a seizure is justified whenever a person or entity has previously destroyed evidence, failed to comply with court orders, or repeatedly shown dishonesty towards the courts or the plaintiff(s). Whether force may be used to access areas of a premise is within the discretion of the court. In an early decision under the Act a court ordered seizure of the defendant’s computer at the defendant’s residence. Mission Capital Advisors LLC v. Romaka, Case No. 16 CIV. 5878 (S.D.N.Y. July 29, 2016). In this instance the court found that the defendant had disregard its initial temporary restraining order. However, this court did not authorize force to access areas within the premises on which property containing trade secrets would be located.

In contrast, the court in AVX Corporation v. Kim, Civil Action No. 6:17-CV – 624-MGL (D.S.C. March 8, 2017), did authorize law enforcement officials to use force to access locked areas if necessary. The court granted the seizure under the Act, in part because the defendant/employee had previously signed a nondisclosure agreement as a condition of employment with the plaintiff. In addition, the defendant had also repeatedly been dishonest, attempted to conceal the misappropriated computer files, and retained physical possession of the confidential files.   The court also granted an ex parte temporary restraining order to prevent actual or threatened misappropriation in the event the defendant intended to transfer the trade secrets to the plaintiff’s business competitor(s). Another court granted a seizure order in Blue Star Land Services, LLC v. Coleman, 2017 WL 621090(W. D. Oklahoma December 8, 2017) based upon the alleged duplicity towards the plaintiff and the significant value of the trade secrets. The court concluded that a Rule 65 order would be ineffective, because

  1. the defendants could easily copy the trade secrets onto other storage media,
  2. their prior behavior demonstrated a pattern of evasion and disregard of law; and
  3. harm to the plaintiff could not be remedied in a less intrusive manner.

Although most courts have relied upon Rule 65 and not an ex parte seizure under the Act, the above decisions provide exceptions of which practitioners should be aware. For this reason, a defendant’s attorney should urge prompt compliance with a Rule 65 order, so a defendant personally delivers property to the court without physical intervention by law enforcement officials. The alternative to this initial compliance could become an unexpected disruption of a home or business, as well as destruction of third persons’ property if they innocently share a targeted premise.

©2019 Adrienne B. Naumann, all rights reserved. Ms. Naumann does not sponsor or endorse the advertisements at adriennebnaumannword.press.com.

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