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Federal Defend Trade Secrets Act Imposes Notice Requirements For Employers

President Obama signed into law the Defend Trade Secrets Act of 2016 (DTSA) on May 11, 2016 effective immediately. DTSA provides businesses with a federal basis to bring a misappropriation of trade secrets claim. Previously, only state law governed civil misappropriation of trade secrets. An important aspect of DTSA is that it provides immunity from criminal and civil liability for an individual disclosing a trade secret to any federal, state, or local government official, or to an attorney, for the purpose of “reporting or investigating a suspected violation of law.” Immunity is also provided to individuals who disclose a trade secret to his or her attorney in an action against an employer for retaliation for reporting a violation of law. Additionally, this immunity allows the individual to use the trade secret in the retaliation court proceeding.

DTSA requires employers to provide notice of this immunity to employees either by inclusion in an agreement with employees, independent contractors and consultants that governs use of trade secrets or in a policy document cross-referenced in such an agreement, which establishes the employer’s policy for reporting suspected violations of law. Failure to provide this notice results in the employer being ineligible to recover exemplary damages and attorney fees that DTSA would normally allow in a suit against an employee.

Employers should be proactive in amending agreements and policies regarding trade secrets and confidential information to ensure they are able to recover necessary damages should a misappropriation of trade secret problem arise. Please contact the McGrath North Intellectual Property Group for assistance.