Sedona Model Jury Instructions for DTSA: A Step Forward—But Questions Remain

The federal Defend Trade Secrets Act (“DTSA”) is celebrating its 10^th anniversary.  After many years of consideration, in 2016, Congress passed and the President signed the DTSA.  Patterned on the Uniform Trade Secrets Act adopted in most states, the DTSA creates a federal cause of action for misappropriation of trade secrets and thereby gives litigants a direct avenue into federal court.  Since then, the federal courts have been grappling with how to manage DTSA cases.  One issue still to be resolved is the absence of model jury instructions in most jurisdictions.

After years of study, The Sedona Conference® Working Group 12 on Trade Secret Law has now released draft model jury instructions for trade secret cases.  These draft jury instructions seek to promote uniformity and consistency, provide a foundation for courts, and reduce disputes as parties prepare their cases for trial.  The draft was available for comment and then is expected to go through a reconciliation process before being formally proposed.  Of course, courts are under no obligation to defer to any independent group.

The draft instructions are designed to bring greater certainty to several areas.  They provide detailed frameworks for three distinct misappropriation theories: improper acquisition (including theft, bribery, trespass, or espionage); unauthorized disclosure (any conduct that enables another to learn the trade secret); and unauthorized use (exploitation likely to result in injury to the trade secret owner or enrichment to the defendant).  Notably, the draft says nothing about “inevitable disclosure,” a doctrine that has been rejected by several jurisdictions.

Another area left largely unresolved is the requirement that a trade secret holder identify its alleged trade secrets “with a reasonable degree of precision and specificity that is particular enough to separate each alleged trade secret from matters of general knowledge in the trade.”  “Reasonable particularly” is not a standard that has proven clear in practice.  And the draft instructions do not shed light on how this standard differs from the standard imposed earlier in a case, such as on a motion to dismiss or summary judgment.  Sedona has offered guidance and examples at earlier stages.

Another area where the instructions aim to provide clarity is combination trade secrets.  The draft instructions take a position on a split of authority that has divided courts: whether a defendant who takes only part of a combination trade secret can be liable for misappropriation.  The draft adopts what appears to be a “substantial portion” standard, instructing that misappropriation can occur when a defendant acquires, discloses, or uses a “substantial portion” of a combination trade secret, even if the defendant did not take every component of the combination.  This approach aligns with decisions from circuits that have recognized partial misappropriation, but it conflicts with the stricter view adopted by other courts that require acquisition or use of the entire combination for liability to attach.  By embracing the substantial portion test, the draft instructions effectively take sides in an ongoing debate about how far trade secret protection should extend when information derives value from a particular combination of otherwise known elements.  This choice will likely prove controversial during the comment reconciliation process, as defendants may argue it expands liability beyond what some circuit precedent supports, while plaintiffs may contend it provides necessary protection for combination innovations that are vulnerable to piecemeal appropriation.

Trade secret holders, whether or not they are currently litigants, should pay attention to this development, weigh in as needed, and consider the model once finalized.