Important new federal legislation, Defend Trade Secrets Act (“DTSA”) has been signed into law. The most significant change of this new law is trade secret owners may now bring a civil claim for misappropriation of trade secrets to federal court. Prior to this legislation, trade secret theft was governed exclusively by state law resulting in wide variety of outcomes and uncertainty. Another significant change under the new federal law is the right, in extraordinary circumstances, for an ex parte seizure order; if certain specific findings are made, showing: (1) a temporary restraining order or another form of equitable relief is inadequate; (2) an immediate and irreparable injury will occur if seizure is not ordered; and (3) the person against whom seizure would be ordered has actual possession of the trade secret and any property to be seized. This new federal law doesn’t preempt state laws. It provides trade secret holders with important, additional recourse, more uniformity and access to federal courts.
The single most important part of this new legislation requires employers and contractors to provide a specific “whistleblower clause” (or reference to it) in every contract with employees or independent contractors governing trade secrets, proprietary rights or confidential information in order to recover critically important damages – such as punitive damages or attorney’s fees. Unless employers provide the prescribed notice in every contract with their employees or independent contractors they waive these incredibly important rights. The one immediate step we’re recommending is for all Non-Disclosure Agreements, Employee Policies and Procedures or other Confidentiality Agreements to be reviewed and updated to include the notice language required by the statute. Otherwise, a sizable element of potential recovery in every successful trade secret case will be forever lost.
A brief re-cap of this new legislation includes:
The first group of new enactments includes a number of more technical provisions such as re-defining “trade secret” and “improper means”; clarifies that ex parte seizures may only be instituted for a limited and defined set of circumstances; and directs the Federal Judicial Center to develop best practices for the execution of seizures and the storage of seized information.
The second group of enactments provides protection to whistleblowers, who disclose trade secrets to law enforcement in confidence for the purpose of reporting or investigating suspected violations of law, and outlines protections for confidential disclosures of trade secret in lawsuits or anti-retaliation proceedings. The statute, importantly, extends immunity under both state and federal laws in both civil and criminal proceedings.
We’d be glad to assist clients with reviewing and updating documents to ensure these important protections are included in all applicable confidentiality agreements.
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Attorney Tegan Blackburn regularly counsels clients on wide range of sophisticated business and corporate matters, including advice on protecting their assets and “secret sauce”, trademark registration and infringement issues, regulatory compliance and a wide range of contacting issues.
(Note: This new law is based on a number of the provisions of the Uniform Trade Secret Act of 1985, adopted by several states, which was intended to provide better trademark protection and more uniform standards to trade secret holders doing business in multiple states.)
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