The Defend Trade Secrets Act of 2016 (“DTSA”) was signed into law by President Obama on May 11, 2016. The legislation features a provision for exemplary damages and attorneys’ fees in certain cases of willful or malicious trade secret misappropriation, and also contains immunity and notice provisions that impact employers.
The legislation includes a whistleblower provision pursuant to which an individual may gain immunity from criminal and civil liability under any Federal or State trade secret law if the individual makes a disclosure, in confidence, to a Federal, State, or local government official, either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of the law. The immunity also includes situations where a trade secret is included in a court filing that was filed under seal. Additionally, the DTSA allows an individual to disclose a trade secret to his/her attorney and use the trade secret in a lawsuit against the individual’s employer for retaliation by an employer resulting from the individual’s reporting of a suspected violation of law.
Another important provision of the DTSA is the mandatory notice provision. An employer must provide notice to employees in any contract or agreement that governs use of trade secrets or other confidential information (employment contracts, non-disclosure agreements, etc.). The notice requirement also extends to independent contractors and any agreement that governs the disclosure of a trade secret. Notice can be provided in the contract or agreement by cross-referencing a policy document also provided to the employee that sets forth the employer’s reporting policy for a suspected violation of law. Failure to provide notice precludes the employer’s ability to recover exemplary damages and attorneys’ fees against the employee. The legislation does not state that these are the only penalties for a failure of notice and further penalties may be levied for a failure to notify.
It is highly recommended that agreements entered into after the effective date of the DTSA which are designed to protect trade secrets be reviewed and revised to include the immunity notice required by the DTSA or cross-reference a policy document which is provided to the employee that specifically sets forth the employer’s reporting policy for a suspected violation of law.