Concerned About Protecting Your Trade Secrets?
the situation
Something that many employers have in common is a concern about protecting their confidential information, particularly in this day and age, when job hopping is somewhat common. Many employers have some significant concerns about making sure that their trade secrets are fully protected from disclosure by employees that move on to greener pastures—this includes things like customer lists, pricing strategies, manufacturing methods, and other similar types of information. As many employers are aware, in the spring of last year, the Defend Trade Secrets Act (“DTSA”) was signed into law—providing a federal cause of action for the misappropriation of trade secrets along with state laws that address trade secrets. But in order to get the most benefit out of this law (meaning the ability to recover the most damages), employers need to make sure that employees are given notice of immunity rights.
the ruling
The DTSA provides that if an employer can establish trade secret theft, it may be entitled to seize property necessary to prevent the propagation or dissemination of the trade secret.” 18 U.S.C.A. § 1836(b)(2). The DTSA also authorizes courts to award other relief, including granting an injunction, awarding money damages, including damages for the actual loss suffered and for any unjust enrichment received by the misappropriating party, exemplary damages up to twice the amount of the actual and unjust enrichment damages, if the theft was willful and malicious, and the attorneys’ fees of the prevailing party. 18 U.S.C.A. § 1836(b)(3).
But if employers want to be able to claim these exemplary damages and attorneys’ fees, there is a catch—in any new agreement governing trade secrets or other confidential information, they must provide notice of the DTSA employee immunity provisions. 18 U.S.C.A. § 1833. These immunity provisions basically protect employees who reveal trade secrets to governmental officials or attorneys “solely for the purpose of reporting or investigating a suspected violation of law” or for use in an anti-retaliation lawsuit. Employers can comply with the notice requirement in a number of ways—by including the required provision regarding immunity in any contract or agreement related to trade secrets or confidentiality, by including the provision in a whistle-blower policy that is referenced in any agreement related to trade secrets or confidentiality, or by inserting this provision into its employee policies, provided that employees are alerted to this new provision.
The following language needs to be included in the notice:
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 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 law. 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 is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal; and does not disclose the trade secret, except pursuant to court order.
the point
Many states have their own laws which protect trade secrets—and these state laws contain different requirements and offer a variety of types of relief and are not affected by this requirement. But in order to take optimal advantage of this fairly new federal law, employers need to update their practices to make sure they are giving their employees the proper notice related to immunity under the DTSA.
