By UpCounsel Attorney Seth Heyman

Employers will soon be able to take advantage of a federal private right of action for misappropriation of trade secrets. The Defend Trade Secrets Act (DTSA), which was passed by both houses of Congress in a rare act of bipartisanship, is expected to be signed by President Obama any day. It will apply to any misappropriation of trade secrets.

Greater Predictability for Companies Filing Suit

Many states have their own trade secret protection laws, but they vary from state to state, and many state court judges have proven themselves unwilling to accommodate out-of-state companies seeking to enforce them in their courtroom.

The DTSA will create a more uniform body of case law and more predictability to company litigants.

Over time, the DTSA will create a more uniform body of case law and provide more predictability to company litigants. It’s important to note that the DTSA does not preempt state trade secrets laws, so filing in state court remains an option for trade secret theft victims.

A Key Provision: Notifying Employees and Contractors About Immunity

All employers need to be aware of one provision buried in the DTSA. This provision necessitates a change to whatever form of employment agreements employers use with employees and contractors to protect their confidential information and trade secrets.

The last section of the DTSA amends the Economic Espionage Act to create immunity from liability where an individual (i.e., a current or former employee or contractor) confidentially discloses a trade secret to a government official or an attorney, or in a court filing.

The DTSA necessitates a change to employment and independent contractor agreements to protect confidential information and trade secrets.

This section of the DTSA requires that “[a]n 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.” An employer that fails to comply may not be awarded exemplary damages or attorneys’ fees in an action under the DTSA unless the employee or contractor was provided with this notice.

The Takeaway

If you are an employer that incorporates trade secret protection language in your agreements with employees and contractors, you should consult with an attorney to revise these agreements. This will ensure that you’re able to take advantage of all the remedies available under the DTSA should a current or former employee or contractor misappropriate your company’s trade secrets.

Get a free proposal from Seth.

About the author

Seth Heyman

Seth Heyman

For the past 20 years, Seth has represented businesses on matters ranging from entity formation and contract management to advertising law, regulatory law, global operations and Internet law. He has served as in-house counsel for companies, both public and private, where he was responsible for regulatory compliance, contract management, corporate governance and HR best practices.

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