On May 11, 2016, the Defend Trade Secrets Act of 2016 (the “DTSA”) was signed into law. Although the DTSA provides greater protection for trade secrets under federal law, it also will require employers to change their confidentiality agreements with employees and contractors in order for your company to avail itself of all the remedies under the DTSA (e.g., obtain attorney’s fees or exemplary damages if your company brings a suit under the DTSA). The DTSA allows trade secret theft victims to seize property without prior notice (but only in extraordinary circumstances) to prevent the propagation or dissemination of the stolen trade secret.
As part of this law, the DTSA immunizes employees from civil and criminal liability (under state and federal law) when disclosing trade secrets as a “whistleblower,” in certain situations. To qualify for this form of immunity, the disclosing person or entity must have made the disclosure under one of two alternative situations.
- The disclosing party (an employee or company contractor) must have made the disclosure “in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney, and that disclosure must have been made solely for the purpose of reporting or investigating a suspected violation of law.” OR
- The disclosure must have been “made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.”
However, if neither of the above situations applies, then the disclosing party will not be protected from liability under the DTSA for such disclosure (but check with your local counsel, your state laws may provide additional protections).
Starting May 12, 2016, the DTSA requires employers to notify their employees and their independent contractors of these immunities. If an employer fails to provide this notice, the DTSA specifically provides that the employer cannot obtain increased damages or attorney fees against an employee or contractor who discloses the company’s trade secrets.
Fortunately, it may be a simple fix to update your company’s confidentiality agreement to comply with DTSA. Your company could copy the relevant immunity provisions into their non-disclosure agreement (and have the employee acknowledge the provision and applicability). Alternatively, the employer may comply by providing a cross-reference to a document which includes the employer’s policy for reporting suspected violations of law (such as the employer’s written whistle-blower policy or confidential information policy).
Here is a link to the Defend Trade Secrets Act: https://www.congress.gov/bill/114th-congress/senate-bill/1890/text