When the Defend Trade Secrets Act (DTSA) was passed in 2016, it opened the doors in federal court to a federal cause of action for trade secrets claims. At first, many thought the law for DTSA would closely follow state laws, especially in states like California, where there was a long history of cases addressing trade secret jurisprudence. This study from Lex Machina shows that trade secret cases are more popular than ever, but just as importantly, that there are emerging differences between a federal cause of action under DTSA and a state cause of action. Two of these differences include the standard for obtaining a preliminary injunction and how much enhanced damages a plaintiff can get. This highlights the need to carefully consider the strategic needs of the client when considering what type of trade secret claim to bring, and whether to file it in state court or federal court.

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"Claimants for whom early injunctive relief is important may have accordingly since turned to state-law trade secret protections that are in many circumstances seen as more favorable to employers," the report said, offering a possible contributor to the trend.

The report cited two legal developments that may have led to the shift toward state claims — the Federal Trade Commission's since-abandoned rule banning most employee noncompete agreements and a 2024 Federal Circuit ruling in Insulet v. EOFlow Co. Ltd., which raised the bar for preliminary injunctions under the DTSA.

However, the report said the DTSA remains important for plaintiffs in high-stakes disputes, in part because of the enhanced damages it includes.

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