Understanding the New Federal Trade Secret Law
On May 11, 2016, President Obama enacted a new federal trade secret protection law as part of an update to the Economic Espionage Act of 1996 (EEA). The new trade secret law, known as the Defend Trade Secrets Act of 2016 (DTSA), makes federal protection against the misappropriation of trade secrets available to private parties. (Previously, the EEA considered trade secret theft solely as a federal crime.)
Before the DTSA, private parties who sought to protect their trade secrets from misappropriation were limited to bringing forth a claim under state law. And, although most states have trade secret protection laws, those state laws vary. Added to the sometimes difficult question of which state’s law to apply, this often caused a lack of uniformity and predictability to trade secret protection. The new DTSA does not preempt state trade secret laws, but adds additional protection for trade secrets under federal law. Plaintiffs seeking to remedy trade secret theft will now have the option to proceed under state law, federal law, or both.
The DTSA not only provides the right to sue directly in federal court, but also, expands the definition of trade secrets, adds new remedies, and includes express “whistleblower” protections. All companies dealing with sensitive competitive information will be affected by this new law. But it is the whistleblower protections that present the most immediate and practical impact for companies.
This blog post and accompanying podcast (the first of a two-part series) focuses on the practical steps companies should start taking in order to benefit from the full protections of this new law.
New Protection for Whistleblowers
The DTSA gives immunity to employees, independent contractors and consultants who disclose trade secrets, in confidence, to government officials for the purpose of reporting violations of the law. And employers are now required to give notice of this immunity in any contract or agreement that governs the use of a trade secret or other confidential information.
If an employer fails to include this immunity notice, it may not recover exemplary (punitive) damages or attorneys’ fees in any lawsuit it might bring against an employee for improper disclosure of trade secrets.
To meet this notice requirement, employers can provide the notice in the contract or agreement, or provide a cross-reference to a policy document. It is therefore important for employers to review any of their contracts and policies that deal with the use or disclosure of trade secrets – such as non-disclosure agreements, employment contracts, employee handbooks, consulting contracts, independent contractor agreements, and collaboration and joint venture agreements – to make sure they contain the required whistleblower notice.
Join Antigone Peyton and Kandis Koustenis as they discuss these and other practical steps business owners should start taking in order to comply with and enjoy the full protections of this new federal trade secret law
Photo credit: Steven Depolo