A Recent Federal Law that Protects Trade Secrets Is Not All Carrot for Employers
Congress recently placed trade secrets on roughly equivalent footing as other forms of intellectual property (trademarks, patents and copyrights) by passing the Defend Trade Secrets Act (DTSA). For those followers (or insomniacs) who read my previous blog posts on the DTSA (found here and here), you’ll know that this new law has some interesting new options for trade secret owners. But the DTSA is not all carrot for trade secret owners; Congress slipped in a stick, too.
Under the DTSA, an employee who discloses trade secrets cannot be prosecuted criminally or be civilly liable if that disclosure was made in confidence to a government official or attorney “solely for the purpose of reporting or investigating a suspected violation of law” or in a lawsuit, provided the filing that contains the secret is sealed to prevent disclosure. Companies may say “so what? Lots of laws have those kinds of protections, so where is the stick?” Well, the DTSA includes a provision that requires employers to notify employees of that protection. If the notification is not provided, the company cannot later recover attorneys’ fees and additional damages when if they pursue a lawsuit against someone who has misappropriated (i.e., stolen) trade secrets. In other words, not having employees sign an acknowledgement about protections afforded to whistleblowers can come back to bite the owner of trade secrets down the road.
So what do employees need to be told? The DTSA is not entirely clear as to the specific language or even how it that message is communicated, other than the fact that notice must be “in any contract or agreement that governs the use of a trade secret or other confidential information.” The easiest way to satisfy this requirement is have each employee sign an acknowledgement of the legal protections as part of overall company polices, annual HR training or as part of a non-disclosure agreement (which companies should have employees sign). While that may be an administrative headache to provide this notice, that burden will decrease over time as the notice is a routine part of agreements. Given the downside of not providing the notice, this should be an easy call for companies.
Other than inertia, what issues may prevent a company from providing the notice set forth in the DTSA? Share this article with your thoughts.