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The Defend Trade Secrets Act: How It Might Affect You

May 16, 2016

On May 11, 2016, President Obama signed into law the Defend Trade Secrets Act.  What is the DTSA and what does this mean to you, our friends and clients:

  1. The new Defend Trade Secrets Act amends the Economic Espionage Act of 1996 and provides a new federal cause of action for trade secret misappropriation.  It does not displace state trade secret misappropriation laws, rather it coexists with existing state laws, and provides an additional enforcement venue for civil suits within the federal court system.
  2. The DTSA provides remedies including injunctions and damages and, in certain extraordinary circumstances, it provides for civil seizure of property to prevent the use or dissemination of a misappropriated trade secret.
  3. If you are in a position to bring a trade secret misappropriation law suit, you should still consider whether to bring the action in state or federal court, depending on whether your state’s laws provide more protection, more favorable discovery and motion practice, and greater damages.
  4. Federal courts can award damages for actual loss, unjust enrichment or a reasonable royalty for the unauthorized disclosure or use of a trade secret.  For willful and malicious misappropriation, courts can award triple damages and reasonable attorney’s fees.  And, if a claim of misappropriation is made in bad faith, reasonable attorney’s fees can be awarded to the prevailing party.
  5. Last, the DTSA includes a safe harbor provision for whistleblowers.  Whistleblowers are granted both civil and criminal immunity for disclosing a trade secret in confidence to a government official, or an attorney, when that disclosure is made solely for the purpose of reporting or investigating a suspected violation of law.  The safe harbor provision can also be used to protect against a limited disclosure of trade secrets when an employee files a retaliation claim.  

Keep in mind that employee is defined very broadly in the DTSA and includes “any individual performing work as a contractor or consultant for an employer.”   A notice that immunity for the use of trade secret information in an anti-retaliation lawsuit must be included in any contract or agreement that governs the use of trade secrets and other confidential information.  This would cover, for example, non-disclosure or confidential disclosure agreements.  Failure to comply with the notice requirement doesn’t foreclose a federal lawsuit, but will result in the employer losing the ability to recover enhanced damages and attorneys’ fees. 

So, employers should consider reviewing and updating policy statements and agreements, as appropriate, to make sure the law’s safe harbor provisions are reflected in those documents. 

If you have any questions about the DTSA, please consult your intellectual property counsel. 

 

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