Defend Trade Secrets Act ("DTSA") Enacted Into Law

Labor and Employment Law

May 27, 2016

Defend Trade Secrets Act Enacted Into Law

The Defend Trade Secrets Act (“DTSA”) was enacted into law on May 11, 2016. For the first time, employers are now authorized to pursue a private civil action in federal court for the misappropriation of a trade secret. However, while this is largely good news for employers, businesses must also remain mindful of the law’s new whistleblower protections and notification requirements. 

Under the DTSA, if a trade secret is acquired by improper means or otherwise disclosed without consent, employers may seek injunctive relief against actual or threatened misappropriation, and damages for actual losses caused by any misappropriation, unjust enrichment, and reasonable royalties. Perhaps the most powerful remedy, though, is that in the event of willful and malicious misappropriation, businesses may seek reasonable attorneys’ fees and supplemental damages up to two times the amount of actual damages. The DTSA also includes enhanced criminal penalties, as well as a unique, limited remedy by which courts may order the seizure of a defendant’s computers and other property. 

Employers required to provide written notice.

However, as noted above, the DTSA also provides new whistleblower protections for individuals who disclose a trade secret in confidence to a government official or attorney, as long as the disclosure is made for the purposes of reporting a violation of law. Of most immediate importance to employers, when a business engages an employee, contractor, or consultant in work that involves the use of trade secrets or other confidential information, the business must provide the individual with written notice of his or her whistleblower immunity protections. This notice can be incorporated into the individual’s contract, an employee handbook, or a separate policy document provided to the individual. If a business fails to provide proper notice, it will foreclose its right to seek supplemental damages and attorneys’ fees, even if a trade secret is misappropriated in a willful and malicious manner. Our attorneys remain available to draft proper notifications and, of course, to assist businesses with protecting their valuable proprietary information. 

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