Defend Trade Secrets Act - Immediate Action Item for Employers and HR Departments

On May 11, 2016, President Obama signed into law the Defend Trade Secrets Act (DTSA) giving companies greater access to federal courts and allowing for the civil seizure of property to prevent dissemination of trade secrets.

For employers and HR Departments, the DTSA creates an immediate action item.  

The DTSA requires employers to provide a written notice-of-immunity to employees and contractors “in any contract or agreement with an employee [or independent contractor] that governs the use of a trade secret or other confidential information.”  The statute indicates that this requirement may be satisfied via a reference to a policy document rather than restating the entire immunity provisions in each agreement. After May 12, 2016, all employee and contractor confidentiality agreements should include the notice. There is no small-business exception to the notice requirement.

This paragraph is intended to adopt the immunity language from the statute:

Defend Trade Secrets Act Notice of Immunity:  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 is made in confidence to a Federal, State, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law. 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 is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. 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 files any document containing the trade secret under seal; and does not disclose the trade secret, except pursuant to court order.

Employers who fail to comply with the notice requirement and later sue an employee or contractor for trade secret misappropriation under the DTSA, the employer will not be able to collect exemplary double-damages or attorney fees.