What Every Employer Needs to Know About the Defend Trade Secrets Act (DTSA)

May 20, 2016

Types : Alerts

On May 11, 2016, President Obama signed into law the DTSA, which for the first time provides for a federal private right of action for misappropriation of trade secrets.

The trade secret protections of the DTSA will work in addition to existing state law protection of trade secrets. Forty-seven states, including Pennsylvania, New Jersey and Delaware, have enacted the Uniform Trade Secrets Act.

The DTSA will be a valuable tool for employers seeking to protect their intellectual property. Employers aggrieved of trade secret misappropriation now have automatic access to federal courts. The DTSA also has a provision allowing an employer aggrieved of trade secret misappropriation to obtain–without prior notice to the alleged wrongdoer–a federal court order directing federal marshals to seize the misappropriated trade secrets from the defendant. The DTSA also contains provisions expressly authorizing injunctions, and allowing attorney’s fees and exemplary (triple) damages to awarded in certain situations.

The DTSA also imposes certain administrative obligations on employers. The DTSA contains a unique provision not found in state laws, which affords criminal and civil immunity to employees who disclose trade secrets to law enforcement as part of reporting suspected illegal behavior. Significantly, the DTSA requires employers utilizing agreements with confidential information protection provisions to also provide a whistleblower protection notice in the agreement.  This whistleblower protection notice obligation potentially applies to: 1) employment agreements; 2) non-compete and non-solicitation agreements; 3) confidentiality and proprietary rights agreements; 4) independent contractor agreements; 5) consulting agreements; and 6) severance agreements.  Failure to provide this whistleblower protection notice could deprive an employer seeking to protect its trade secrets from the right to punitive damages or attorney’s fees.

With the enactment of the DTSA, we recommend that you consult with an attorney to ensure that all of your agreements and policies regarding confidential information reflect the new obligations of the DTSA.

For more information, contact  Chastity C. Bruno at cbruno@mmwr.com or 215-772-7290.


Trade Secret and Noncompete Litigation

Montgomery McCracken’s Trade Secret and Noncompete Litigation Practice represents employers and employees in disputes involving trade secrets, noncompete and nonsolicitation agreements, the employee duty of loyalty, and similar matters. Experience

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