Employers Receive New Federal Protection for Trade Secrets

05/20/2016 / Daniel Ballintine

Trade secret protection has become a huge issue for employers over the past two decades, as the Internet and changes in technology have made it easier for employees (and others) to steal information and use it with competitors. Until May 12, 2016, employers had to rely upon state law for protection of their trade secret information. Forty-eight of the fifty states, including Minnesota, have already adopted statutory trade secret protections. In Minnesota, for example, this law is embodied in Chapter 325C of the Minnesota Statutes. Effective May 12, however, the “Defend Trade Secrets Act of 2016” (DTSA), an amendment to the Economic Espionage Act (18 U.S.C. § 1831), provides employers with a federal cause of action for trade secret misappropriation.

The DTSA does not supplant state law, but rather provides an alternative forum in federal court for employers to pursue trade secret misappropriation claims. Litigating in federal court can prove advantageous to employers in certain circumstances. The DTSA also provides employers with an additional remedy (seizure), and offers them nationwide uniformity.

In general, the DTSA grants trade secret protections to any company engaged in “interstate or foreign commerce.” Those protections include the ability to recover damages and attorneys’ fees (including double damages for the willful or malicious misappropriation of trade secrets), seizure of property and information, and access to the federal court system for the prosecution of claims for misappropriation of trade secrets.

The seizure provisions of the DTSA allow courts to order law enforcement to search for and seize trade secret information and any information derived from it. This remedy is available to stop the “propagation or dissemination” of the trade secrets at issue, but only in “excessive circumstances.” The seizure remedy must be used cautiously, however, because the DTSA also provides a cause of action to employees who are the victims of “wrongful” seizures.

Employers should also take note that the DTSA grants immunity to employees who disclose trade secrets as “whistleblowers.” Whistleblowers are those who report an actual or “suspected violation of law” in “confidence” to government officials or attorneys. The DTSA requires employers to provide written notice of this immunity in employment agreements governing the use of confidential and trade secret information. If such notice is not provided, the employer will be unable to recover double damages or an award of its attorneys’ fees in connection with an otherwise meritorious DTSA claim. Employers should consider immediately revising their agreements to provide this required written notice of the DTSA’s whistleblower immunity provisions.

Please contact any of the attorneys in Larkin Hoffman’s employment law group to discuss the DTSA and what you should do to fully invoke its protections for your business.