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Energy & Intellectual Property
acquisition, this implicates not only the person or entity that takes the information through improper means, but also any person or entity that ultimately acquires the information and knows or should know that the information was acquired through improper means. Misappropriation through disclosure also requires that the person or entity making the disclosure or receiving the disclosure knows or should know that the trade secret was acquired through improper means.
Furthermore, any person or entity that “uses” a trade secret that knows or should know that it was acquired through improper means has also misappropriated the trade secret. As discussed below, damages, unjust enrichment, or royalties are based on misappropriation of the trade secret. In many cases, it is the use, not merely the acquisition or the disclosure, that leads to damages.
THERE MUST BE A NEXUS TO INTERSTATE COMMERCE BUT IT IS NOT A JURISDICTIONAL REQUIREMENT
18 U.S.C. § 1836(b)(1) provides that “[a]n owner of a trade secret that is misappropriated may bring a civil action under this subsection if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” There is no reference to jurisdiction in this establishment of a private cause of action for misappropriation of a trade secret. In fact, 18 U.S.C. § 1836(c) provides a separate jurisdictional statement that “[t]he district courts of the United States shall have original jurisdiction of civil actions brought under this section.” Thus, the required nexus to interstate commerce is an element of the cause of action and is not a requirement for subject matter jurisdiction.
See Providence Title Co. v. Truly Title, Inc., No. 4:21-CV-147-SDJ, 2021 WL 2701238 (E.D. Tex. July 1, 2021), reconsideration denied, No. 4:21-CV-147-SDJ, 2021 WL 5003273 (E.D. Tex. Oct. 28, 2021) (concluding that the required nexus to interstate commerce set forth in 18 U.S.C. § 1836(b)(1) is not a jurisdictional limit on the power of the Court to hear a DTSA case, but rather is an element of the cause of action under the DTSA.)
More broadly, the Supreme Court of the United States has made clear that elements of a cause of action or other statutory limits on a plaintiff’s right to recovery are not jurisdictional limitations unless the statute “clearly states” as much. Arbaugh v. Y & H Corp., 546 U.S. 500, 515, 126 S. Ct. 1235, 163 L. Ed.2d 1097 (2006). If the statute does not label an element as jurisdictional, then courts should not treat it as such. Id. at 516, 126 S. Ct. 1235. See also, United States v. Vargas, 673 F. App’x 393, 395 (5th Cir. 2016) (“The commerce clause nexus element in [a] statute is not ‘jurisdictional’ in the sense that a failure of proof would divest the federal courts of adjudicatory power over [a] case.”).
However, when pleading the elements of a claim under the DTSA, it is important that the plaintiff allege a sufficient connection between the misappropriated trade secrets and a product or service used in or intended for use in interstate commerce. For example, in Providence Title, the plaintiff alleged that it “provided title services to out-of-state purchasers of Texas properties and worked with out-of-state underwriters on Texas title insurance policies alleged that its title services were integral to an interstate transaction” to satisfy that element of their claim. Id. at *1.
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FDCC ANNUAL FIVES 2023