Defend Trade Secrets Act—What Employers Need to Know

In 2016, the Defend Trade Secrets Act (DTSA) became new law that created a federal cause of action for trade secret misappropriation. Prior to this law taking effect, employers or owners of trade secrets who were dealing with trade secret misappropriation were left primarily with remedies in state courts. While the DTSA does not preempt state trade secret laws such as the Florida Uniform Trade Secrets Act, it supplements state laws and provides a uniform, federal definition of trade secret misappropriation.

How do employers/owners of trade secrets file claims under the DTSA? What remedies are available if an employer/owner of a trade secret files a federal claim? And what notice requirements and obligations do the owners have with regard to the DTSA? We explore, below.

Federal Trade Secret Misappropriation Claims Under the DTSA

The DTSA applies to owners of trade secrets, which primarily tend to be employers who have potential claims against current and former employees who have taken or misappropriated a trade secret. Sometimes, the DTSA claim may also be against that former employee’s new employer.

If an employer believes that it has a trade secret misappropriation claim under the DTSA, it has the burden to prove the element of misappropriation as it is defined under the DTSA.

While the DTSA is similar to the Florida Uniform Trade Secrets Act and other state laws, one of the differences of the federal law is that it comes with a civil seizure remedy. Under the law, upon ex parte application by the trade secret owner, a court can “issue an order providing for the seizure of property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.” The law also provides for other types of remedies, including exemplary damages and attorney’s fees.

For many employers, the DTSA provides a new avenue (and federal court) to bring a trade secret misappropriation claim, as well as an important new remedy. However, employers need to be aware of specific obligations under the DTSA, as well. Most significantly, there are notice requirements that employers must abide by and to enjoy the available remedies under the DTSA, employers must pay close attention to notice requirements.

Notice Requirements for Employers Under the Defending Trade Secrets Act

To be eligible for all of the remedies available under the DTSA or otherwise have the abilities to bring a DTSA claim, an employer is required to provide notice of the immunity and anti-retaliation provisions. Specifically, the employer is required to provide notice to all workers—including employees, independent contractors, and consultants—in any employment contract or agreement concerning the use of trade secrets. There are two different ways an employer can provide the required notice:

Incorporating language providing by the DTSA into all employment documents concerning trade secrets and workplace confidential information; and/or
Inserting cross-references to the DTSA language in the employer’s policy concerning procedures for reporting violations of the law.

For employees, these whistleblower and anti-retaliation provisions are important:

Those provisions state:

Whistle-blower immunity: An individual shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigation a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
Anti-retaliation lawsuit: An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of the law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files a document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

If you have questions about the DTSA, you should speak with an experienced federal trade secret and non-compete lawyer.

Resources:

law.cornell.edu/uscode/text/18/1833

leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0600-0699/0688/0688.html