A Slight Detour to Washington, DC

Washington DC in May is well known for its Cherry Blossoms, especially along the Tidal Basin and some of the beautiful neighbourhood streets throughout the city. For Washingtonians and our beloved tourists, the blossoms herald the arrival of spring. But for the 535 Members of Congress, these blossoms are a reminder that the legislative clock is ticking. So as the tourists flock to the Mall, Congressional leaders are congregating in committee rooms in their efforts to move long stalled legislation.

One case in point is the Defend Trade Secrets Act of 2016, or the DTSA. First introduced in April, 2015, the legislation was voted and approved on April 27, 2016 and is now on its way down Pennsylvania Avenue to the President’s desk for signing, which he most certainly will.

What is the big deal, one might ask? For starters, the DTSA will allow any owner of a trade secret to have the US government seize property, without advance notice.

Who needs to know? Without a doubt, any company that does business in the United States -from fashion houses to the gaming industry to manufacturers of auto parts. If your company uses non-disclosure agreements to protect confidential, sensitive information, your legal office needs to get a copy of this note.

Whether it is proprietary information regarding customers, pricing, sourcing, product design or manufacturing methods, trade secrets provide companies with a competitive edge in the market by virtue of the fact that the trade secrets are not generally known. If you use employment contracts or non-disclosure agreements with your employees restricting their use of the company’s trade secrets or other confidential information (and if you don’t, you really should), then you need to be aware of a provision in the Defend Trade Secrets Act of 2016 (DTSA),

To be even more specific, the DTSA has a section providing immunity from claims of trade secret misappropriation to whistleblower employees who disclose their employer’s trade secrets or confidential information to State or Federal agencies for the purpose of reporting or investigating a suspected violation of law. Significantly, that section also incorporates a requirement that an employer “shall provide notice of the immunity” created by the DTSA “in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” Failure to include this notice will strip the employer of certain remedies (such as enhanced damages and attorney fees) available in an action against an employee brought under the DTSA. This notice requirement applies to contracts or agreements entered into or modified after the DTSA becomes law.

So what does this mean for you? It means that your company may want, no, may need to revise your existing employee contracts and NDA’s. Going forward, employment contracts or NDA’s with new employees addressing their access to, and their permitted uses of, your trade secrets and other confidential information should incorporate the new notice required by the DTSA. The same is true for any modifications to existing contracts or NDA’s with current employees. Oh, by the way, for purposes of this notice requirement, the DTSA broadly defines “employee” as including any individual “performing work as a contractor or consultant for an employer,” so any agreements used with contractors and consultants should also be revised to include the notice.

The DTSA, not something to keep locked away and in the shadows of your inbox.