The Auto Industry Has a New Weapon To Protect Its Secrets

16 May 2016 Dashboard Insights Blog

President Obama signed the Defend Trade Secrets Act (“DTSA”) into law on Wednesday, May 11, 2016. Members of the auto industry spend significant time and money developing trade secrets that give them a competitive advantage. The DTSA provides the auto industry with a new method to protect its valuable trade secrets. Prior to the DTSA, most trade secret cases were handled by state courts under individual state laws. With the passage of the DTSA, employers can now go into federal court to seek an injunction and/or damages to protect their trade secrets.

Notably, the DTSA provides, in extraordinary circumstances, a method for employers to seek the seizure of property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action. While the DTSA provides additional protections for employers, the DTSA also provides immunity from liability for confidential disclosure of a trade secret to the government or in a court filing. Further, the DTSA includes language meant to defend against claims based on inevitable disclosure (i.e., the former employee will inevitably disclose to his/her new employer the trade secrets he/she learned at his/her former employer).

In order to take full advantage of the DTSA, employers must provide notice of the immunity provisions of the DTSA. Specifically, in order to be entitled to exemplary damages or attorney fees under the DTSA,

[a]n employer shall provide notice of the immunity set forth in this subsection in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.

The notice requirement applies to contracts and agreements that are entered into or updated after the enactment of the DTSA. While the DTSA may not be the best weapon for each situation, employers should consider whether the DTSA gives them additional tools to protect their trade secrets.

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