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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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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