On May 11, 2016, President Obama signed into law the federal Defend Trade Secrets Act of 2016 (“DTSA”). The DTSA, effective immediately, creates a new federal cause of action for theft of trade secrets. It does not preempt existing state laws, such as the Minnesota Uniform Trade Secrets Act, Minn. Stat. Chapter 325C. The DTSA is codified as a series of amendments to the Economic Espionage Act at 18 U.S.C. Sections 1831 – 1839.
How DTSA Affects Employers
The DTSA contains a notice requirement regarding immunity from civil or criminal liability for the disclosure of a trade secret, in confidence, by an individual to: (1) a federal, state, or local government official, either directly or indirectly; (2) to an attorney solely for the purpose of reporting or investigating a suspected violation of law; or (3) to an attorney as part of a whistleblower retaliation lawsuit.
The notice requirement in DTSA, in part, provides:
A. In General — An employer shall provide notice of the immunity set forth in this subsection in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.
B. Policy Document — An employer shall be considered to be in compliance with the notice requirement in subparagraph (A) 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.
C. Non-Compliance — If an employer does not comply with the notice requirement in subparagraph (A), the employer may not be awarded exemplary damages or attorney fees under subparagraph (C) or (D) of section 1836(b)(3) in an action against an employee to whom notice was not provided.
D. Applicability — This paragraph shall apply to contracts and agreements that are entered into or updated after the date of enactment of this subsection.
4. Employee Defined — For purposes of this subsection, the term ‘employee’ includes any individual performing work as a contractor or consultant for an employer.
5. Rule of Construction — Except as expressly provided for under this subsection, nothing in this subsection shall be construed to authorize, or limit liability for, an act that is otherwise prohibited by law, such as the unlawful access of material by unauthorized means.
The immunity provision of DTSA reads as follows:
1. Immunity — 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.
2. Use of Trade Secret Information in Anti-Retaliation lawsuit —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—
A. files any document containing the trade secret under seal; and
B. does not disclose the trade secret, except pursuant to court order.
There is no minimum size requirement for employers. All employers in the United States are covered by this law.
How to Comply with DTSA
In order to comply with the DTSA and to be able to seek attorney’s fees and double damages under the Act, employers need to add notice language to all confidentiality or non-disclosure agreements signed after May 11, 2016, or include a reference in the agreements to a stand-alone policy.
This requirement applies to agreements with individuals who are independent contractors as well as employees.
Consequences of Failure to Comply with DTSA
The consequence of not being able to seek attorney’s fees and double damages under the new federal law may not appear to be of the utmost concern. 18 U.S.C. Section 1883 (b)(3)(A), however, states that employers “shall” include this notice. There could, therefore, be other consequences of non-compliance that we cannot foresee. Our recommendation is that all employers comply with this federal mandate in order to protect their confidential information and trade secrets.
In light of the newly enacted Defend Trade Secrets Act of 2016, employers should add notice language to their confidentiality and non-disclosure agreements that are signed after May 11, 2016. Another option is for employers to include a reference in their confidentiality and non-disclosure agreements to a stand-alone policy. Failure to take such action will result in the inability to obtain attorney’s fees and double damages under the law, and possibly other consequences that have not yet been identified. For more information regarding the Defend Trade Secrets Act of 2016 or for assistance in updating your confidentiality and non-disclosure agreements, contact one of the Minnesota trade secrets attorneys of Trepanier MacGillis Battina P.A.
About the Author:
Minnesota trade secrets protection attorney V. John Ella has extensive experience representing businesses in matters involving trade secrets. If you have any questions about the Defend Trade Secrets Act of 2016, please contact him at 612.455.6237 or firstname.lastname@example.org. Trepanier MacGillis Battina P.A. is a Minnesota trade secrets law firm located in Minneapolis, Minnesota.