Notice to Employers: Take Immediate Action To Protect Your Company Under The Defend Trade Secrets Act

Authored by Adam D. Hirtz

May 26, 2016

President Obama signed the Defend Trade Secrets Act of 2016 (DTSA) into law earlier this month creating the most significant expansion of federal intellectual property law in years. The law, which goes into effect immediately, provides trade secret owners with the ability to choose between federal and state court forums when pursuing claims of trade secret misappropriation. Most significantly though, it requires employers to provide notice of whistleblower immunity to employees in contracts involving the protection of trade secrets or other confidential information.

In order to take advantage of all the remedies available under the DTSA, employers are required by the DTSA to provide a notice of the new whistleblower immunity “in any contract or agreement with an employee that governs the use of a trade secret or other confidential information” for contracts “entered into or updated after the date of enactment of the statute.” The statute allows for compliance with this notice through cross-referencing a policy document or including the entire immunity provision in each contract. Employers who fail to provide this notice may not be awarded exemplary damages or attorney fees for actions brought under the DTSA against an employee that did not receive notice.

Furthermore, prudent trade secret owners should keep in mind that the term “employee” is broadly defined under the DTSA as “any individual performing work as a contractor or consultant for an employer.” Accordingly, trade secret owners should consider updating agreements with not only employees but also independent contractors and vendors who may have access to confidential information and trade secrets.

We recommend the following steps to help employers take full advantage of the new law:

 1.  Update any existing company whistleblower policy documents to include the required notice under the DTSA.

2.  Update employment agreements for new employees and contracts with independent contractors/vendors to provide the required notice under the DTSA.

3.  Update any existing standard contracts or non-disclosure agreements used by the company to protect its trade secret information to ensure they contain the required notice.

4.  Require that any suppliers, vendors, or other contractors whose employees have access to your company’s trade secrets provide appropriate notice to their employees.

5.  Ensure that your business is in full compliance with the DTSA notice requirement by having legal counsel review standard contracts and company policy documents to make sure they contain the required notice.

For more information about the Defend Trade Secrets Act of 2016 or any other issues, please do not hesitate to contact Adam D. Hirtz.

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