The Employer's Legal Resource: Employers With Trade Secrets Must Take Steps Under New Law
The United States Congress has given companies another tool to protect their trade secrets. President Obama recently signed the Defend Trade Secrets Act. The Defend Trade Secrets Act allows companies to sue persons for misappropriation of trade secrets in federal courts. Prior to the passage of the Act, in order to get to federal court on a trade secret claim, a trade secret owner needed an independent basis for federal court jurisdiction; the trade secrets claim alone was insufficient. The doors to the federal courts are now open for all trade secret claims.
The Act is similar in many ways to state laws such as the Oklahoma Uniform Trade Secrets Act. It does, however, have some interesting facets that vary from state laws. The Act provides a tool to allow companies to regain possession of misappropriated trade secrets without providing notice to the adverse party. This is an extreme measure that will only be allowed in extraordinary circumstances. A party seeking such an ex parte order must show among other factors that it will be irreparably injured and that absent such an order the party in possession would destroy, move, hide or otherwise make such trade secrets inaccessible to the court. Of course it remains to be seen how this new tool will work in practice, but it seems it will be limited to very extreme situations.
The Act also provides whistleblowers with immunity from liability when they disclose matters as provided for in the Act.
Notably, effective immediately and going forward, the Act requires that employers notify their employees of this whistleblowers' immunity in any agreement governing the use of trade secrets or other confidential information. The notification can be given by incorporating the provisions of a policy in an employee handbook or policy related to the reporting of violations of law. If the disclosure is not given to employees, including contractors and consultants, then the employer risks losing the right to obtain exemplary damages or attorney fees under the Act.
It is important that companies review all confidentiality agreements and include language which complies with the Defend Trade Secrets Act before having any new agreements signed. If you have any confidentiality policies, we also recommend you amend those policies to include the whistleblower immunity language in those policies.
By Matthew L. Christensen, MChristensen@dsda.com