On May 11, 2016, President Obama signed the Defend Trade Secrets Act of 2016 (“DTSA”) into law. The DTSA provides a new federal civil cause of action for trade secret misappropriation. It also imposes a new whistleblower immunity notice requirement on employers.
The new law creates a new standard for legal notices in contracts for companies that hire employees and engage independent contractors (pretty much everyone)…
Perhaps most importantly from a “to-do” action-item perspective for technology companies, human resource departments and all employers, the new law creates a new standard for required legal notices in contracts for companies that hire employees and engage independent contractors (pretty much everyone); that is, for an injured party to take full advantage of the law, the employment or independent contractor contract at issue must have new legal language. Therefore, companies need to have a legal review of their contracts with an attorney familiar with the DTSA.
In layperson terms, the DTSA creates a new violation of federal law for violations of trade secrets. Traditionally previously, violation of trade secrets was only a state law issue, requiring enforcement pursuant to individual state laws and courts, which often have widely differing standards. Now, a plaintiff the right to go to federal court, as well as the continued option to go to state court. This is a very powerful new option because federal court follows a different set of rules and procedures that are uniformly applicable throughout the United States. Many intellectual property lawyers also tend to prefer federal court because it tends to be a more responsive and consistent forum, with a one-judge per case procedure. State courts often have a multitude of judges hearing different parts of the same dispute, and state courts are sometimes not equipped for technical rules and electronic discovery procedures.
Now, a plaintiff the right to go to federal court that follow a different set of rules and procedures that are uniformly applicable throughout the United States.
The DTSA is derived from a bipartisan bill to amend a federal criminal statute known as the Economic Espionage Act of 1996 (EEA) to create the first federal private civil cause of action for theft or misappropriation of trade secrets.
The DTSA includes remedies for include injunctive relief, monetary damages, exemplary damages in cases of bad faith with double damages, an order for seizure of property, and attorney fees. Moreover, the DTSA has provisions for pre-judgment seizure of property in extraordinary circumstances with the court taking seized materials into its custody.
The statute of limitations for commencing a civil action under the DTSA is three years from the date that the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered.
Employers take notice: Whistleblowers are protected from civil or criminal liability under federal or state trade secret law for disclosing a trade secret in confidence to government official or to an attorney solely for purpose of reporting or investigating a suspected violation of law or included in a complaint or other document filed under seal in a lawsuit.
Also for employers and human resource departments, the DTSA whistleblower provisions require employers to 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.” The DTSA broadly defines “employee” to include “any individual performing work as a contractor or consultant for an employer.” Failure to comply may cause forfeiture of exemplary damages or attorney fees in an action against an “employee” to whom the notice was not provided. The notice requirement applies to contracts and agreements that are “entered into or updated” after the date of enactment of the DTSA. An employer may comply with this notice obligation by cross-referencing a policy document under certain conditions.
The DTSA broadly defines “employee” to include “any individual performing work as a contractor or consultant for an employer.”
Employers should consult with legal counsel to ensure compliance with federal whistleblower immunity notice requirements, as well as have a review of all agreements for the inclusion of the new required legal notices. The DTSA naturally, is somewhat of a pervasive paradigm shift that because an immediate action-item for human resource staff, most or all technology-related companies and all employers with trade secret information.
If I can assist you, send me an InMail on LinkedIn or an email to my attention at excellence@zegarelli.com. My personal home page is available, as well.
Gregg Zegarelli is Managing Shareholder of Technology & Entrepreneurial Ventures Law Group, PC. Gregg is nationally rated as “superb” and has more than 25 years of experience working with entrepreneurs and companies of all sizes, including startups, INC. 500, and publicly traded companies. He is Adjunct Professor in the Duquesne University Master of Leadership graduate degree program, currently teaching, Developing Leadership Character Through Adversity. He is author of One: The Unified Gospel of Jesus, and The Business of Aesop™ article series, and co-author with his father, Arnold Zegarelli, of The Essential Aesop: For Business, Managers, Writers and Professional Speakers. Gregg is a frequent lecturer, speaker and faculty for a variety of educational and other institutions. Copyright © 2016 Gregg Zegarelli. Gregg can be contacted through LinkedIn.
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