May 13, 2016

President Obama Signs Federal Trade Secret Law

On May 11, 2016, President Obama signed into law The Defend Trade Secrets Act ("DTSA").  Effective May 12, 2016, the DTSA amended The Economic Espionage Act to allow a new civil action in federal court for the misappropriation of trade secrets provided the trade secrets are related to a product or service involved in interstate commerce. 

Since the DTSA does not preempt state trade secret laws, owners of trade secrets may now use both state and federal courts and remedies for misappropriation of trade secrets to the extent that state law does not conflict with federal law.

The DTSA provides extensive remedies which include injunctive relief, compensatory damages, and attorney's fees. Willful misappropriation can double damages. The DTSA also allows the extraordinary remedy of ex parte seizures of property to prevent the use or distribution of trade secrets which are the subject of the litigation. This remedy provides plaintiffs with significant potential early leverage in trade secret litigation and may motivate owners of trade secrets to pursue protection under the DTSA rather than under state law.

Action with respect to at least one provision of the DTSA should be considered by employers immediately.  The DTSA contains immunity and retaliation protection for employees who disclose trade secrets while reporting violations of law to government officials or attorneys.  Employers must give notice of the DTSA's "immunity provisions" in any contract or agreement with any employee where such contract or agreement addresses the disclosure or use of any trade secret or confidential information if they want to secure the benefits under the DTSA. The DTSA's expansive definition of "employee" requires such notice to also be provided to contractors and consultants. This notice provision applies only to new or updated contracts entered into after May 11, 2016, and does not require the replacement or revision of existing contracts. Employers would be prudent, however, to consider an immediate notice of this new policy to all employees, contractors and consultants.  Employment agreements that address trade secret protections should either incorporate this notice into the contract or contain a provision referring the employee to a specific policy that contains this notice in an employee handbook or policy manual. Failure to provide this notice prohibits employers from recovering exemplary damages or attorney's fees in federal trade secret litigation.

If you have questions about the DTSA or have concerns about its implications for your business, please contact us.