Takeaway: Trade secrets that were once protected only at the state level are now under federalized trade secrets protection as well. One of the key immediate impact for employers is DTSA’s new requirement for employment and contractor agreements affecting confidential information.
The Defend Trade Secrets Act (“DTSA”) models the Uniform Trade Secrets Act and duplicates the definitions of “trade secret,” “misappropriation,” and “improper means.”
The DTSA offers immunity for whistleblowers and requires that employment contracts provide employees with notice of their immunity. The DTSA provides civil and criminal immunity for employees and contractors who (1) disclose trade secrets in confidence to the government or their lawyers solely for the purpose of reporting or investigating a suspected violation of law, (2) disclose the trade secrets to their personal attorneys in connection with a lawsuit alleging retaliation for reporting a suspected violation of law, or (3) disclose or use the trade secret in any complaint or other document filed in a lawsuit, as long as they file the trade secret information under seal.
Consequently, the DTSA requires employers to provide notice of the foregoing immunity in any contract or agreement with an employee or contractor that governs the use of a trade secret or other confidential information. Alternatively, the employer may provide a cross-reference to a policy document provided to the employee or contractor that sets forth the employer’s policy for a suspected violation of law.
Employers will not be able to recover the full extent of remedies available under the DTSA if they fail to comply with the immunity notice provision, specifically exemplary damages (of up to two times actual damages) and attorneys’ fees for willful or malicious violations. Therefore, it is important for employers to incorporate the immunity notice into their relevant employment agreements and policies as soon as practicable.
Further, the DTSA will also allow employers to file civil lawsuits in federal court for trade secrets misappropriation by departing employees. For complex trade secret cases that may be cross-state or international cases, the federal courts may serve as a superior forum since there are more resources at the federal level to hear trade secret disputes and with more sophisticated review.