New Federal Statute Protecting Trade

Secrets
On May 11, 2016 the Defend Trade Secrets
Act was signed into law, becoming effective
immediately. It provides new enforcement
options in misappropriation cases, and
requires that a new advisement be provided
to all employees.

The Basic Framework

The DTSA creates, for the first time, a
federal statutory framework governing civil
claims for trade secret misappropriation.
Like patent, trademark, and copyright
claims, trade secret misappropriation claims
now may be filed in federal court, without
changing the procedures available under
state trade secret law. The DTSA contains a
3-year statute of limitation.
In addition to the remedies already available
under state law, the DTSA provides for the
issuance of ex parte civil seizure orders to
prevent trade secret theft in extraordinary
circumstances.

New
Employee
Requirements

Notice

The statute contains a significant new

employee notice provision. Employers are
required to notify their employees of an
immunity provision contained in the DTSA
that exempts from liability a whistleblower
who discloses trade secret information to a
governmental authority for purposes of
reporting a suspected violation of the law, as
well as an individual who discloses trade
secret information under seal in a lawsuit.
Notification of this immunity provision must
be set forth in any contract or agreement
May 2016

that governs the use of a trade secret or other

confidential information entered into with
an employee after the DTSA took effect.
This notice may be satisfied by referencing
in the contract or agreement an employee
handbook providing the notice. However, in
addition to an employee handbook trade
secret provision, we recommend in most
circumstances a separate proprietary
information or non-disclosure agreement
(including the required notice), which can
offer far greater protections for a company
than an employee handbook provision alone.
Alternatively, these trade secret protections
(and notice) can be included in an offer of
employment or more general employment
agreement.
Additionally, the DTSA defines employee
to include independent contractors and
consultants. Since an employee handbook
does not apply to independent contractors
and consultants, we recommend that a
companys standard forms for independent
contractors and consultants also be updated
to provide this new notice.
Employers who fail to provide the requisite
notice cannot seek an award of exemplary
damages or attorneys fees in any
subsequent lawsuit against the employee
under the DTSA.

Proper Protection of Trade

Secrets
The statute defines trade secrets broadly to
include all forms and types of financial,
business, scientific, technical, economic, or
engineering information . . . . However,
similar to state law, to qualify as trade secret

New Federal Statute Protecting Trade

Secrets
information the owner must take reasonable
steps to keep the information confidential,
and the information must derive value from
not being publically known.
The passage of the DTSA demonstrates the
increased importance of trade secret law in
protecting a businesss intellectual property
and will lead to more uniform national
enforcement of trade secret rights. The
DTSA serves as an important reminder for
businesses and their attorneys to properly
document their trade secrets and to ensure
that appropriate protections are in place to
prevent disclosure. Failure to take these

May 2016

basic steps could undermine a companys

enforcement efforts in future trade secret
litigation.
For more information on the DTSA or
other trade secrets issues, please contact:
Steven Hanle
(949) 725-4126
shanle@sycr.com

Stephen Kong
(424) 214-7013
skong@sycr.com

Jeffrey Dinkin
(805) 730-6820
jdinkin@sycr.com

Justin Klaeb
(424) 214-7041
jklaeb@sycr.com