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Employers Should Amend Company Policy Documents in Light Of First-Ever Federal Trade Secrets Law

Wednesday, June 22, 2016 - By: Michael J. Radin
By Michael J. Radin, Esq. and Matthew S. Furman, Esq.
Tarlow Breed Hart & Rodgers, P.C.

In May 2016, President Obama signed the Defend Trade Secrets Act of 2016 (“DTSA”) into law. This is the first federal law that regulates trade secrets, a critical type of intellectual property that, until now, has been regulated solely by the states - often in inconsistent ways.  

Examples of trade secrets can range from a company’s customer lists or proprietary processes, all the way up to the formula for Coca Cola.

Here is what you need to know about the new law:

  1. For the first time, the DTSA gives owners of trade secrets access to federal courts to prevent or recover for theft of their trade secrets.  Among other things, this means a company can get nationwide relief from whichever federal court in which it brings the lawsuit (which is enforceable by any other federal court).  The DTSA also establishes a procedure by which trade secret owners can get federal marshals to seize a stolen trade secret before it can be misused or disseminated.  To compensate for stolen trade secrets, the law allows owners to recover actual damages plus punitive damages and attorney fees.
  2. Of immediate importance to employers, the DTSA requires a new whistleblower immunity notice provision to be in “any contract or agreement with an employee that governs the use of a trade secret or other confidential information.”  This applies to any confidentiality agreement entered into or amended as of May 11, 2016.  This broad language conceivably mandates such language be included not just in any agreement with an employee covering confidentiality, non-disclosure and intellectual property ownership, but in company-wide policies and handbooks as well.
  3. Employers who fail to include the new employee notice in appropriate documents will severely hamper their ability to bring claims over the theft or misappropriation of trade secrets.  Victimized companies will not be able to recover punitive damages or attorney fees if they did not include the new notice provision for their employees.  This could be particularly damaging to companies doing business in Massachusetts, where state law generally does not allow for punitive damages or attorney fees in trade secret theft cases against employees.
It is important to note that the DTSA does not change or override existing state trade secret law, but instead provides a second layer of protection to employers.  Although employers will be able to invoke state law and/or the DTSA, depending on what is most advantageous to their claim, prudent employers should be mindful of the DTSA and comply with its new employee notice provisions to make sure all options are available. 

Employers should consult with legal counsel about the impact of the DTSA and the best ways to protect the remedies available to them if an employee misappropriates trade secrets.  

For immediate assistance in addressing these issues, please contact Attorneys Michael J. Radin, Esq. and Matthew S. Furman, Esq. of Tarlow Breed Hart & Rodgers, P.C.