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Labor & Employment Alert >> New Rights and Obligations for Employers Under the Defend Trade Secrets Act

May 23, 2016

President Barack Obama on May 11, 2016 signed the Defend Trade Secrets Act (DTSA), which provides a federal private right of action for the misappropriation of trade secrets. Companies were previously only able to bring civil actions for trade secret protection in state court under various state laws. Under the new law, trade secret owners can pursue claims in federal court and apply for an order to seize property to prevent the dissemination of trade secrets. The DTSA also provides for remedies including injunctive relief and damages for actual loss, unjust enrichment and a reasonable royalty amount.

Relevance in Employment Context
While an employer may seek an injunction against an employee, the request must be based on evidence of a threatened breach, rather than solely on the employee’s knowledge of a trade secret. If such injunction is granted, it will be limited so that it will not prevent the employee from entering into another employment relationship.

Employees who disclose trade secrets in confidence to a government official or attorney, or for the purpose of reporting or investigating a violation of law, are immune from liability under the DTSA. In addition, it is not a violation of the DTSA for an employee to use trade secret information, under specified guidelines, in a lawsuit claiming retaliation by the employer because the employee reported a suspected violation of law.

Going forward, employers must provide notice of these immunity provisions in any agreements with employees that govern the use of trade secrets or confidential information. The notice requirement may also be met by including a reference in the agreement to a company policy that contains the notice of immunity.

Bottom Line

Employers may now bring a civil action in the federal courts, under the DTSA, against employees who misappropriate trade secrets. Where employees have misappropriated trade secrets, employers may seek damages, injunctive relief and a seizure order. Employers must also revise all non-disclosure, confidentiality and other agreements that govern the use of trade secrets or confidential information to inform employees who sign the agreements of the immunity provisions either directly or by reference to a company policy containing the immunity language.