Tag Archives: Defend Trade Secrets Act

Do your employee/contractor non-disclosure agreements comply with new DTSA notice requirements?

Magnifying glassHave you updated your company’s form employee and independent contractor non-disclosure agreements lately? Do they comply with the notice requirements relating to “whistleblowers” that took effect May 11, 2016 under a new federal law? If your answer is “no” or “I don’t know”, read on.

The new Defend Trade Secrets Act helps U.S. businesses protect their trade secrets by asking federal courts to order seizure of property necessary to prevent dissemination of the trade secrets. It also permits businesses to seek injunctions and damages in federal court for trade secret misappropriation.

The DTSA also provides some immunity for whistleblowers who use trade secrets by stating that:

An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (a) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

and

An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

The immunity section of the DTSA is especially important for employers because it requires employers to provide with notice of the DTSA’s immunity clauses “in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” The Act defines “employee” to include both actual employees and independent contractors. If an employer does not comply with the notice requirement, the employer’s ability to recover damages against that employee in a federal action for theft or other misappropriation of trade secrets will be limited.

Employers can comply with the notice requirement by updating their form employee and independent contractor agreements to include either the notice requirement or a cross-reference to a policy document (such as an employee handbook) that states the employer’s reporting policy for a suspected violation of law.

For additional information about the DTSA, including the law’s seizure and damages provisions, see this previous IP Spotlight post.

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U.S. Senate passes bill to establish federal trade secrets law

On April 4, 2016, the U.S. Senate unanimously passed a bill that, if enacted, will allow trade secret owners to bring suit in federal court to prevent misappropriation of their trade secrets.

The new bill, S. 1890, is known as the “Defend Trade Secrets Act of 2016,” allows trade secret owners to ask federal courts to order seizure of property necessary to prevent further dissemination of the trade secret. The court may also grant an injunction, award damages for actual loss caused by the misappropriation, and award extra damages and/or attorneys’ fees in extreme cases (such as willful or bad faith misappropriation).

The bill defines “misappropriation” as requiring “improper means,” which includes “theft, bribery, misrepresentation, breach or inducement of breach of a duty to maintain secrecy, or espionage through electronic or other means.” Improper means specifically excludes reverse engineering, independent derivation, and other lawful means.

The bill also provides for protection of the trade secret from disclosure during the federal action, and it also requires protection of the accused infringer against publicity.

The Senate bill would not preempt the many state laws that currently protect trade secrets. Instead, it would provide an additional layer of protection for trade secret owners.

The Senate bill has strong White House support. The House version of the bill has over 120 sponsors, but no timetable has been set yet for its consideration.

UPDATE:  On April 27, the House passed the Senate’s version of the bill. The bill will now move to the President for signature.  On May 11, 2016, President Obama signed the bill into law.