Trade Secrets

New Rights And Responsibilities
by Michael R. Lied
Howard & Howard Attorneys PLLC

The Defend Trade Secrets Act of 2016 (“DTSA”) does several things. Initially, it allows for a civil action, as opposed to criminal prosecution, in federal court. It defines “misappropriation” and “trade secret.” In unusual circumstances, the DTSA provides for ex parte seizures, which allows a plaintiff to seek to have the government seize misappropriated trade secrets without advance notice to the defendant. The law also protects whistleblowers.

The DTSA states that an owner of a trade secret that has been misappropriated may bring a civil action if that secret is related to a product or service used in, or intended for use in, interstate or foreign commerce. In the case of a trade secret that is willfully and maliciously misappropriated, a court may award exemplary damages in an amount of not more than two times the amount of damages otherwise awarded. Additionally, the court may award attorney fees.

“Trade secret” means all 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 such information is stored, complied or memorialized. However, the owner of the trade secret must have taken reasonable measures to keep such information secret. The owner must also show that the information derives independent economic value—actual or potential—from not being generally known to, and not being readily ascertainable through proper means by, another person who could obtain economic value from the disclosure or use of the information. Thus, almost every type of information may qualify as a trade secret.

The DTSA provides that an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to his or her attorney—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. An employer must provide notice of the immunity in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.

An employer is considered to be in compliance with the notice requirement if the employer provides 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. If an employer does not comply with the notice requirement, the employer may not be awarded exemplary damages or attorney fees in an action against an employee to whom notice was not provided. This provision applies to contracts and agreements that are entered into or updated after the date of enactment. Note that the term “employee” includes any individual performing work as a contractor or consultant for an employer.

Employers should include language like the following in any employment contracts and in human resources policies: “If you file a lawsuit for retaliation by the Company for reporting a suspected violation of the law, you may disclose the company’s trade secrets to your attorney and use the trade secret information in the court proceeding, provided that you file any document containing trade secret information under seal and do not disclose the trade secret, except pursuant to court order.” iBi

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