On May 11, 2016, President Obama signed S. 1890 – The Defend Trade Secrets Act (DTSA) into law, the final step in creating the first federal civil cause of action against those who misappropriate a company’s trade secrets. In signing the Act, President Obama spoke of American innovation and the threat that trade secret theft, particularly in Asian markets, poses to American jobs, markets, and leadership. Our previous post, See You in Federal Court: Congress Creates Federal Civil Action for Trade Secret Misappropriation, provides details regarding key components of the Act. Now that the DTSA is law, companies have some work to do to ensure that maximum penalties against employee theft will be available.
The DTSA provides a limited immunity for use/disclosure of trade secret information in the case of whistleblower disclosures, anti-retaliation lawsuits against employers, and other lawsuits. A person will not be liable if disclosing trade secrets in confidence to a Federal, State, or local government official or to an attorney for the purpose of reporting or investigating a suspected violation of law; if disclosing in a complaint or other document filed in a lawsuit or other proceeding, if the filing is made under seal; or if disclosing to their attorney and/or using trade secrets in anti-retaliation court proceedings if the trade secret information is filed under seal and only disclosed pursuant to a court order.
Companies must provide notice of this immunity to employees in contracts that dictate the use of trade secret and other confidential information, if the contracts are dated or updated after the law was enacted. Failure to provide the notice will prevent an employer from being awarded exemplary damages or attorneys’ fees. Companies are well advised to consult with counsel to determine how the DTSA will impact their business and next steps with regard to drafting and revising employee/contractor confidentiality agreements.
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Companies are operating in an increasingly globalized and regulated business environment, facing ever-changing and complicated litigation and regulatory challenges. We provide cutting-edge information regarding developments in federal, North Carolina State, and international litigation, as well as in arbitration, regulatory enforcement, and related business practices.
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