Employers Have a Right to Protect Trade Secrets in Federal Court

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All Employers

EFFECTIVE

May 11, 2016

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The Defend Trade Secrets Act (“DTSA”) was signed into law on May 11, 2016.  It amends the Economic Espionage Act of 1996, allowing private companies to protect their trade secrets by bringing civil lawsuits in a federal court.  This brings trade secrets into alignment with protections already in place for owners of copyrights, patents and trademarks.

 

Definition of Trade Secret

According to the Economic Espionage Act, a “trade secret” is business or scientific information that (1) derives independent economic value from being not generally known or readily accessible by the public through proper means, and (2) the owner has taken reasonable measures to keep secret.

 

What does the DTSA do for Employers?

Organizations are now authorized to file suit in federal courts for the misappropriation of their trade secrets.  DTSA claims can be brought up to three years after the date the misappropriation occurred, or the date by which reasonable diligence would have discovered the misappropriation.

Remedies available for complainants include injunctions, compensatory damages, exemplary damages, and reasonable attorneys’ fees, and ex parte seizure orders (i.e., seizure of allegedly misappropriated trade secret items from defendant(s) without notice to defendant(s)) under specified conditions.

In addition, although the DTSA is a federal law, it does not preempt existing state protections for trade secrets/confidential information.  Organizations could potentially bring claims for trade secret misappropriation under the DTSA and any applicable state law, though they would not receive duplicative remedies.

 

Protections for Whistleblowers

The DTSA provides criminal and civil immunity under any federal or state trade secret law for whistleblowers who disclose trade secrets under specified circumstances: (1) when the disclosure is made for the sole purpose of reporting or investigating a suspected violation of law to a federal, state, or local government official or an attorney, or (2) if the disclosure is made in a complaint or other document filed under seal in a lawsuit or other proceeding.

Employers are required to provide notice of this potential immunity in any contract or agreement that governs use of trade secrets/confidential information.  This applies to contracts or agreements entered into, or amended after, the effective date of the DTSA.

The term “agreement” may include employment, independent contractor, or consulting agreements; severance agreements; non-disclosure agreements; non-compete and non-solicitation agreements; separation and release of claims agreements; or confidentiality and proprietary rights agreements.

 

Action Items:

  1. Consult with legal counsel to incorporate required anti-retaliation notice in any employment agreement/contracts regarding trade secrets/confidential information.
  2. Contact ManagEase at (888) 230-3231 for assistance in updating corresponding handbook policies concerning trade secrets/confidential information to include the potential immunity language.

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.

© 2016 ManagEase, Incorporated.

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