Defend Trade Secrets Act of 2016 Impact: Employers Must Provide Notice in Employment Agreements

On May 11, 2016, President Obama signed into law the Defend Trade Secrets Act of 2016, 18 U.S.C. 1832. The DTSA, modeled on the Uniformed Trade Secrets Act, provides federal protection for trade secrets and confidential information, something that has generally been governed by the states until now. The key provisions of the DTSA include:

• Federal jurisdiction/right to sue for civil claims for trade secret misappropriation
• Provides federal courts ex parte injunctive power for seizure of misappropriated information
• Provides Employers remedies for actual damages and attorneys’ fees
• Does not preempt state trade secrets acts or any other state law
• Provides whistleblower immunity from liability
• Does not adopt the inevitable disclosure doctrine

The big takeaway is that in order to take advantage of the remedies provided in the Act, an employer must provide notice to its employees that the Act provides whistleblower protection/immunity for disclosure of trade secrets to government officials for the sole purpose of reporting violations of the law.

The DTSA requires that Employers provide notice of the immunity in all “contracts and agreements that are entered into or updated after the date of enactment” governing the use of trade secret or other confidential information. Failure to do so prevents Employers from recovering punitive damages or attorney fees that are otherwise available under the DTSA. Even if your company does not have a traditional trade secret as a concern, given the broadened definition of trade secret, if it maintains nondisclosure agreements, non-solicitation agreements or confidentiality agreements, these agreements will need to be reviewed to confirm they are in compliance with law.

If you are concerned about how the DTSA applies to your Company, and if your Employment Agreements or NDAs need to be updated, please contact our firm for assistance.