The Defend Trade Secrets Act of 2016:
What Employers Need to Know
By: James Bucci, Partner
The Defend Trade Secrets Act of 2016 (DTSA) was passed by Congress at the end of April 2016 and signed by President Obama on May 11, 2016. Effective May 12, 2016, the DTSA adds to employers’ arsenal new weapons to fight against the dissemination of their trade secrets. However, in order to use those weapons, the DTSA now requires employers to provide its employees and independent contractors with notice of newly created whistleblower immunities.
Additions to the Arsenal in the Fight Against Trade Secret Misappropriation
In Pennsylvania and New Jersey, employers have always had the option of pursuing trade secret misappropriation claims in state court. The DTSA now provides employers with a federal private right of action for the misappropriation of trade secrets. For many employers, litigating these complex matters in federal court will be a preferable option for, among other reasons: (1) uniformity; and (2) under the DTSA, employers can recover actual damages, restitution, injunctive relief, exemplary relief (up to two times the award of actual damages) and attorney’s fees. Additionally, the DTSA has added a “seizure” provision, which permits federal courts to order “seizure of property necessary to prevent the propagation or dissemination of the trade secret” at issue in the litigation. Seizure has not been generally available in PA or NJ.
New Whistleblower Immunity Notice Requirement
The DTSA also amends 18 U.S.C. § 1832 to provide certain immunities to whistleblowing employees for actions that would otherwise amount to trade secret misappropriation. Whistleblowers will be immunized if the disclosure:
(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.
In order for an employer to have maximum protection under the DTSA, employers are now required to provide a 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.” If an employer fails to provide such notice, the employer will not be able to collect exemplary relief or attorney’s fees in any lawsuit against an employee (or independent contractor) for trade secret misappropriation under the DTSA.
If you presently have restrictive covenant/confidential information/trade secret agreements with your employees or independent contractors, then it is a good time to update those agreements. If you have any questions, please contact James Bucci, a Partner in the Firm’s Employment Law & Litigation Practice Group, at firstname.lastname@example.org or 856.968.0686.