For all of 2016, one of the most significant developments in the Intellectual Property field was the implementation of the Defend Trade Secrets Act of 2016 (“DTSA”).

Federal Rights

Before implementation of the DTSA, trade secret protection was a matter of state law. While businesses had federal rights for patents, trademarks and copyrights, trade secret was solely governed at the state level. The DTSA changed this legal landscape to provide legal uniformity and federal protection for trade secrets as well as access to the federal courts to enforce trade secrets.

Under DTSA a “trade secret” is broadly classified as any “form of intellectual property that allow[s] for the legal protection of commercially valuable, proprietary information.”

As noted, under the DTSA, a trade secret owner can sue for misappropriation n the federal courts. This is a significant development because having adjudicated patent infringement matters for decades, the federal courts are prepared to understand complex trade secrets and the technologies behind them.

Additionally, DTSA provides plaintiffs with the ability to obtain seizure orders where, much like a raid on infringing or counterfeit goods, authorities can go to a defendant and seize misappropriated trade secret information. This could mean seizing computer systems housing information, potentially seizing machinery and product produced as a result of stolen trade secrets. This remedy is not readily available in state court and is potentially a significant weapon. Further, DTSA provides plaintiffs with other remedies as well including recovery of actual damages, restitution, exemplary damages up to twice the award of actual damages, injunctive relief and attorney’s fees.

Contracting with Employees under DTSA

Finally, the DTSA addresses the enforceability of confidentiality and non-compete agreements against employees in certain situations. Under DTSA, employees are given immunity from liability for trade secret exposure where that exposure was made to authorities in a whistleblowing situation. Employers are required to provide employees express notice of this whistleblower immunity right in any confidentiality agreement they request the employee to sign. Failure to provide this disclosure may result in problems if an employer has to litigate against an ex-employee for misappropriation of trade secrets under the DTSA. The failure to disclose could preclude the employer from recovering attorneys’ fees or exemplary damages which it might otherwise be entitled to for such misappropriation.

Lessons to Learn

With this new regime of federal trade secret rights, the important takeaway for businesses is that this is a good time to look at what valuable, proprietary information they have in their possession and consider how that information is protected. Trade secrets are only enforceable — under federal or state law — if they are maintained in secrecy. Second, businesses should review their employee confidentiality and non-compete agreements to ensure that the proper notice of whistleblower immunity is contained in those agreements. On the whole, DTSA provides many benefits but it also imposes this obligation regarding whistleblowing.

If you would like to speak with one of our Intellectual Property attorneys regarding identification and protection of your business’ trade secrets or to review your employment agreements, please contact me at mark.nieds@henlaw.com or by phone at 239-344-1153.