Immediate Action Required After Passage of Defend Trade Secrets Act

On May 11, 2016 President Obama signed into law the Defend Trade Secrets Act (“DTSA”), which went into effect immediately.  The Act creates a federal cause of action for trade secret misappropriation, which is meant to supplement and not preempt state trade secret law.
 
Remedies
The DTSA provides litigants with a number of remedies including ex-parte seizure orders , damages for actual loss and unjust enrichment, or instead of damages, a reasonable royalty for unauthorized use or disclosure.  Exemplary damages for willful or malicious misappropriation can also be awarded as well attorneys’ fees and injunctive relief.
 
Whistleblower Protections Require Immediate Action
Importantly, the Act contains new whistleblower provisions that require companies to take immediate action to be able to take advantage of the Act.  Employees, independent contractors and consultants who disclose trade secrets are protected from prosecution if the disclosure was made to report or investigate an alleged violation of law.  If the employee’s disclosure of highly sensitive company information 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 the law" or as part of a legal proceeding, then that disclosure cannot form the basis for a misappropriation claim against the employee. This safe harbor extends immunity to both state and federal trade secret claims.
 
What You Must Do.
Employers must include notice of this immunity in any agreements entered into or amended on or after May 12, 2016 with employees, contractors or consultants that govern the use of confidential or trade secret information.  Failure to include the notice would preclude the employer from being awarded attorneys’ fees or exemplary damages in any lawsuit against the employee.  The notice requirement applies to all employee proprietary information and invention agreements, nondisclosure and contractor and consulting agreements with individuals.  At Fulmer Ware LLP we advise our clients on how to comply with the notice requirement and other steps to protect their valuable trade secrets.
 
Pam Fulmer is a member of the Standing Committee on Trade Secrets of the Intellectual Property Owner’s Association.   The Committee supported the passage of the Defend Trade Secrets Act.