New Federal Law Provides Additional Protection For Trade Secrets
On May 11, 2016, President Obama signed into law the Defend Trade Secrets Act of 2016 (“DTSA”). The DTSA provides a federal civil remedy for the misappropriation of trade secrets that are related to a product or service used in, or intended for use in, interstate or foreign commerce. Since most companies sell or ship across state lines, the DTSA is expected to have broad appeal.
To take full advantage of the relief available under the DTSA, companies should immediately consider reviewing and revising their current agreements with employees and independent contractors which govern the use of trade secrets or other confidential information. For example, the DTSA provides for the recovery of “exemplary” damages of up to twice the amount of actual damages and attorneys’ fees in the case of willful and malicious misappropriation. However, exemplary damages and attorneys’ fees are available only if notice was provided in the agreement that there is no liability if a disclosure is made to law enforcement or an attorney for the purpose of reporting or investigating a suspected violation of the law or in a court complaint or other document filed under seal. Notice of the “whistleblower” immunity may be provided by cross referencing a policy that sets forth the reporting of suspected violations of the law. However, since trade secret policies are not typically provided to independent contractors, it is more likely that a cross reference will not be sufficient to satisfy the immunity notice at least in regard to agreements with independent contractors.
The DTSA does not preempt state trade secrets law, which exists in 48 states (including Ohio) through the adoption of a version of the Uniform Trade Secrets Act and in two states under common law. While the DTSA provides legal recourse in federal court, before filing a lawsuit for misappropriation of trade secrets, companies will need to consider whether state law and court is preferable to the DTSA and federal court. Notably, the DTSA expressly rejects the “inevitable disclosure” doctrine (which is recognized by some Ohio courts) and does not allow for the grant of injunctive relief if the injunction will prevent a person from entering into an employment relationship.
If you have any questions relating to the protection of your business’ confidential and trade secret information, please contact Brendon P. Friesen or Jennifer E. Horn in our Intellectual Property Group or Jeffrey M. Embleton, Amy L. Kullik, James A. Budzik, or Ann E. Knuth in our Labor and Employment Group.
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