On May 11, 2016, President Obama signed the Defend Trade Secrets Act of 2016 (the “DTSA”), which provides a civil action right under federal law for employers and other owners of misappropriated trade secrets. This new federal protection is in addition to, and does not preempt, any state law rights that might otherwise be available to a party. Previously, employers could only enforce trade secret claims through state law claims. While the DTSA provides employers with a new federal cause of action that can only be filed in federal court, it also places certain requirements on employers in order for them to take advantage of the remedies that can be sought under the new law.
One new remedy provided under the DTSA is a civil seizure procedure that in extraordinary circumstances will allow an employer to petition the federal government without notice to the employee to seize stolen trade secrets even before a lawsuit is filed. This procedure is available when injunctive relief would be insufficient. Even so, a wrongful seizure by the employer could give rise to a claim for damages, exemplary damages and attorney’s fees by the employee or other individual who was subject to the wrongful seizure.
Though the DTSA protects owners of misappropriated trade secrets, it also protects employees and other individuals from criminal and civil claims for violation of trade secret laws when that person discloses a trade secret (1) in confidence to a federal, state or local government official for purposes reporting a suspected violation of law (such as a whistleblower claim) or (2) in connection with a lawsuit for retaliation by an employer for reporting a suspected violation of law, provided in each situation certain actions are taken to protect the trade secret, such as filing the documents under seal.
If an employer or other person that owns a trade secret brings a successful claim under the DTSA, a federal court may: (i) grant an injunction, (ii) award damages for actual loss and unjust enrichment, (iii) award exemplary damages with proof of “willful and malicious” misappropriation, or (iv) if the claim is made or opposed in bad faith or if there is a finding of willful and malicious misappropriation, award attorney’s fees to the prevailing party.
As a condition for an employer to be awarded attorney’s fees or exemplary damages under the DTSA, the employer must provide notice via policy or agreement to its employees and contractors of the immunity from liability for disclosing trade secrets to any government official or through a court filing as noted above. This notice requirement applies to all agreements with employees and contractors entered into or modified on or after May 11, 2016. Employers should review existing policies and forms of agreement and modify the language as necessary in order to avail themselves of their new rights under the DTSA.