United States: Employment Law Commentary - Volume 28, Issue 6 - June 2016


By John A. Trocki III

Trade secrets are a critical component of the intellectual property of a company, either standing alone or as a complement to a company's patent portfolio. Historically, despite the fact that other forms of intellectual property, such as patents, copyrights, or trademarks, were protected by federal law, state law provided the primary protection for trade secrets. This is no longer the case.

In Congressional reports discussing the need for federal protection of trade secrets, "the Commission on the Theft of American Intellectual Property estimated that annual losses to the American economy caused by trade secret theft are over $300 billion, comparable to the current annual level of U.S. exports to Asia."1 In an attempt to help U.S. companies protect these critical assets, on May 11, 2016, President Obama signed into the law the Defend Trade Secrets Act (DTSA).2

This new framework includes provisions critical to the operation of any U.S. business that uses agreements or contracts that include provisions to maintain the confidentiality of a company's proprietary information. Through this article, we do not attempt to discuss every aspect of the new law, instead focusing on the aspects of the DTSA that may affect the day-to-day operation of your business and the agreements commonly used in that business.


The DTSA is an amendment to the Economic Espionage Act of 1996.3 Through the DTSA, federal law now provides access to federal courts to protect all major forms of intellectual property: patents, trademarks, copyrights, and now trade secrets. The DTSA was modeled after the Uniform Trade Secrets Act (UTSA), the trade secret framework under state law, which has been adopted in 47 states.


One important aspect of the DTSA is the express protection it provides to whistleblowers, and the DTSA requires that all employers make their employees aware of that protection in any agreement or policy that relates to confidentiality.4

The DTSA provides immunity to employees from liability for confidential disclosures of a trade secret to government officials (e.g., whistleblowing) or in a court filing. Employees cannot be held criminally or civilly liable under any federal or state trade secret laws for confidential disclosures made to federal, state, or local government officials, or to an attorney, that are "solely for the purpose of reporting or investigating a suspected violation of law."5 The Act also protects employees from disclosures made in court filings, as long as they are made "under seal" (e.g., they are not accessible to the public, only to court personnel and the attorneys involved in the case).6

The DTSA requires employers to provide notice of this immunity to employees, "in any contract or agreement with an employee7 that governs the use of a trade secret or other confidential information."8 Thus, under the DTSA, all agreements with employees that include provisions regarding confidential or proprietary information, such as confidentiality agreements, non-disclosure agreements, or proprietary information and invention agreements ("PIIAs"), must include notice of the DTSA's immunity provision in those agreements.

Employers can also comply with this requirement by including a reference to any corporate policy regarding confidential or proprietary information, which should already contain an exception for disclosure to government officials. The DTSA allows employers to provide the required notice through a "cross-reference to a policy document provided to the employee that sets forth the employer's reporting policy for a suspected violation of law."9

Some sample language can be added to existing agreements or corporate policies to comply with the DTSA:

Exemplar 1 (short format )

Employee acknowledges that he or she has been advised of the immunity from liability under the Defend Trade Secrets Act, and cannot be held criminally or civilly liable under federal or state trade secret law for the disclosure of trade secrets made in confidence to government officials or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law, or included in a complaint or other document in legal proceedings, provided that any such filing is made under seal and protected from public disclosure.

Exemplar 2 (long format )

18 U.S.C. § 1833(b) states:

"An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that—(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."

Accordingly, the Parties to this Agreement have the right to disclose in confidence trade secrets to Federal, State, and local government officials, or to an attorney, for the sole purpose of reporting or investigating a suspected violation of law. The Parties also have the right to disclose trade secrets in a document filed in a lawsuit or other proceeding, but only if the filing is made under seal and protected from public disclosure. Nothing in this Agreement is intended to conflict with 18 U.S.C. § 1833(b) or create liability for disclosures of trade secrets that are expressly allowed by 18 U.S.C. § 1833(b).10

Failure to comply with this notice requirement prevents employers from receiving exemplary damages or attorney fees in actions brought against employees for misappropriation of trade secrets under the DTSA.11


  • The DTSA provides an opportunity to enforce trade secret protection in federal court
  • Prior to the enactment of the DTSA, it was more difficult to bring trade secret claims in federal court, as there was generally no basis for federal court jurisdiction outside of diversity jurisdiction. But the DTSA now provides a federal forum for employers seeking to protect their trade secrets. Importantly, the DTSA does not preempt state trade secret law.12

  • The remedies offered by the DTSA are similar to those provided by the UTSA, but also provide for immediate seizure of materials in extraordinary circumstances
  • Although the remedies afforded parties in the DTSA are generally similar to the remedies provided in the UTSA, one major difference between the two statutes is that the DTSA provides for the seizure of materials containing trade secrets prior to the filing of any lawsuit, or contemporaneously with the filing of a lawsuit, and without notice to the party whose materials may be seized.13

    This mechanism is expressly reserved for "extraordinary circumstances," to "prevent the propagation or dissemination of the trade secret that is the subject of the action."14 Picture an ex-employee, with a thumb drive containing the company's premier trade secrets, about to board the slow boat to Antarctica. Now an employer can head to federal court to seek an order commanding the seizure of the thumb drive to prevent its departure from the United States.

    In other respects, the remedies offered under the DTSA are similar to actions under state trade secret law, including the issuance of injunctions to prevent actual or threatened misappropriation, affirmative actions to protect the trade secret, and the imposition of a reasonable royalty.15

    For instances of willful and malicious misappropriation, the statute provides for exemplary damages no more than two times the damage awarded for the misappropriation, as well as attorneys' fees, which are also available for bad faith claims of misappropriation, and bad faith motions to terminate an injunction or opposing the termination of an injunction.16

  • The DTSA does not adopt the Inevitable Disclosure Doctrine
  • It is not uncommon for employees to leave a position with one company and take a similar position with a competitor. In certain jurisdictions, the doctrine of inevitable disclosure may apply, in which the former employer seeks to enjoin the former employee from working for the competitor, claiming it is inevitable that the departing employee will use his or her knowledge of the former employer's trade secrets while employed by the new employer.17

    The DTSA, however, did not adopt this doctrine, and expressly disclaims it. The new law precludes injunctive relief to prevent a person from entering into an employment relationship based upon information the person knows, instead requiring evidence of threatened misappropriation.18

  • Verbiage is generally consistent with the Uniform Trade Secrets Act
  • Because the DTSA is modeled upon the Uniform Trade Secrets Act, the definitions of key terms in both statutory frameworks are very similar, and the small definitional differences highlight the intentionally broad scope of the DTSA. For example, the definition of "trade secret" used by the DTSA19 is, on its face, more broad than the definition of "trade secret" used by the UTSA:

DTSA definition of "trade secret" UTSA definition of "trade secret"

[A]ll forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if—

  1. the owner thereof has taken reasonable measures to keep such information secret; and
  2. the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public.

UTSA definition of "trade secret"

[I]nformation, including a formula, pattern, compilation, program, device, method, technique, or process, that:

  1. derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and
  2. is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.


  • For any agreements that include provisions regarding trade secrets or confidentiality of information, be sure to include new language specifically referencing the DTSA, or a reference to a corporate policy which explains the immunity provided by the DTSA.
  • Update corporate policies relating to trade secrets, confidentiality, disclosures to government officials, or whistleblowing to include the language required by the DTSA.
  • If you have any questions regarding these or any other employment and labor issues, contact your friendly counsel from Morrison & Foerster's Employment and Labor Group.

In Memoriam
Daniel P. Westman
June 6, 1956-May 22, 2016

Our partner, colleague, and friend Dan Westman passed away on May 22, 2016, after a three-year battle with an extremely rare form of cancer. Dan was an expert on labor and employment law, with a focus, among many things, on trade secrets and whistleblower retaliation. He was an editor of the treatise James Pooley and Daniel P. Westman, Trade Secrets (Law Journal Press 2015), and one of the original authors of Whistleblowing – The Law of Retaliatory Discharge (3d ed., Bloomberg BNA, 2015).

Dan joined Morrison & Foerster as a partner in our Northern Virginia office in 2005 after an already distinguished career as a law clerk to the Hon. Barbara B. Crabb, U.S. District Court, Western District of Wisconsin, and as an employment and labor attorney in California and Virginia. At MoFo, the firm recognized Dan's intellect, skill, good judgment, integrity, kindness, and calm, discreet Norwegian manner; he rose quickly to managing partner of the Northern Virginia office and chair of the Employment and Labor Group. Even during his illness, Dan was almost always available by phone to offer his wisdom and guidance on case strategy and the law.

Dan was a true Renaissance man who enjoyed the outdoors and loved history and sports (especially when Stanford was playing). He was an avid reader, keen bridge player, athlete, ruthlessly competitive Scrabble player, and self-taught guitarist.

Most important, Dan was a loving husband to Alison and father to Peter, Eric, and Alex. Everyone at Morrison & Foerster, especially the Employment and Labor Group and his colleagues in Northern Virginia, will miss him immensely.


1 Sen. Rep. No. 9114-220, 114th Cong., 2d Sess. 2 (Mar. 7. 2016).

2 Pub. L. No. 114-153 (May 11, 2016).

3 18 U.S.C. §§ 1831-1839.

4 See 18 U.S.C. § 1833(b)(1).

5 18 U.S.C. § 1833(b)(1)(A)(2).

6 18 U.S.C. § 1833(b)(1)(B).

7 The definition of "employee" includes "any individual performing work as a contractor or consultant for an employer." 18 U.S.C. § 1833(b)(4).

8 18 U.S.C. § 1833(b)(3)(A).

9 18 U.S.C. § 1833(b)(3)(B).

10 For additional discussion of the DTSA, please review the MoFo Client Alert on the DTSA, available at: ( http://www.mofo.com/~/media/Files/ClientAlert/2016/05/160511DefendTradeSecretsAct.pdf).

11 See 18 U.S.C. § 1833(b)(3)(C).

12 See 18 U.S.C. § 1838.

13 See 18 U.S.C. § 1836(b)(2).

14 18 U.S.C. § 1836(b)(2)(A)(i).

15 18 U.S.C. § 1836(b)(3).

16 18 U.S.C. § 1836(b)(3)(C) and (D).

17 See, e.g., PepsiCo, Inc. v. Redmond, 54 F.3d 1262 (7th Cir. 1995); see also E.I. DuPont deNemours & Co., v. American Potash and Chem. Corp., 200 A.2d 428, 431 (Del. Ch. 1964); and Newell v. Rubbermaid, Inc. v. Storm, C.A. No. 9398-VCN, 2014 Del. Ch. LEXIS 45, *33 (Mar. 27, 2014).

18 See 18 U.S.C. § 1836(b)(3)(A)(i)(I).

19 18 U.S.C. § 1839.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Practice Guides
by Mondaq Advice Centers
Relevancy Powered by MondaqAI
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions