On May 11, the President signed into law the new Defend Trade Secrets Act of 2016 (DTSA). This new statute contains two significant features that employers should note.
The law’s most prominent feature provides for the first time a civil claim in federal courts for misappropriation of trade secrets. Until now, trade secret misappropriation claims have been handled primarily in state courts under laws such as the Virginia Uniform Trade Secrets Act. The state laws have some limitations that are remedied by the new federal statute. For example, the DTSA will allow companies to pursue trade misappropriation that occurs across state and international borders. The new statute also defines “trade secrets” broadly. Greater uniformity in trade secret law nationwide will be a likely result of the DTSA.
A second and perhaps less publicized feature of this new law should also be noted by employers. The DTSA contains some new whistleblower protections for employees. Whistleblowers now have immunity for divulging trade secrets to attorneys or law enforcement agencies when reporting suspected law violations, or if the information is contained in documents filed under seal in court. The statute requires employers to provide notice of this immunity “in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” This would include, for example, employment contracts and severance agreements. Failure to include the immunity notice in these agreements can cause an employer to lose some of its rights under the DTSA, such as the right to collect punitive damages or attorney’s fees from the employee for misappropriation of trade secrets.