Federal Defend Trade Secrets Act (“DTSA”) signed into law in May 2016

31 May 2016 Labor & Employment Law Perspectives Blog
Authors: Carrie Hoffman

The federal Defend Trade Secrets Act (“DTSA”) includes protections for trade secret owners, including civil seizure in extraordinary circumstances, injunctive relief, and the availability of attorneys’ fees and exemplary damages on top of actual damages. While much of this law is about a protection of intellectual property, employers must be aware of a significant issue regarding the DTSA. The DTSA requires that, as of May 12, 2016, all employment agreements that include protections for confidential information or trade secrets must include notice and/or reference to the DTSA’s whistleblower safe harbors and immunity to comply with the DTSA. The failure to include such notice means that an employer will not be able to recover attorneys’ fees or punitive damages. Employers could do so by updating their employment agreements and/or reference to a company policy that provides the required notice. The notice requirement is prospective; meaning that only contracts and agreements signed employees, contractors, and consultants after the enactment of the law must include the notice.

STEPS

Employers should identify all documents that contain nondisclosure of trade secrets or confidential information. These documents could include employee handbooks, proprietary information agreements, nondisclosure agreements, employment agreements, noncompete agreements, offer letters, consulting agreements, and severance agreements.

NOTICE

The notice must adopt the immunity language from the statute:

An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made in confidence to a Federal, State, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law. An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal; and does not disclose the trade secret, except pursuant to court order.

Employers should seek legal advice on the notice and the best ways to implement such notices into their agreements and/or policies.

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