On May 11, 2016, President Obama signed the Defend Trade Secrets Act (“DTSA”) into law, which provides a federal cause of action for an employer to enforce their trade secrets. The DTSA takes effect immediately. Employers should be aware that under the new law, employers have an affirmative duty to provide employees (including consultants and independent contractors) notice of certain immunity provisions. If an employer does not provide this notice to their employees in any agreements which are: (i) entered into or modified after May 11, 2016; and (ii) govern the use of trade secrets or other confidential information, they will be unable to recover exemplary damages or attorney fees in an action against an employee for violations of the DTSA.

The required notice must: advise employees that they are immune from criminal and civil liability under any Federal or State trade secret law for disclosure of a trade secret that:

  1. is made in confidence to a Federal, State or local government official, either directly or indirectly, or to an attorney and solely for the purpose of reporting or investigating a suspected violation of law;
  2. is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; or
  3. is made to an attorney in a lawsuit for retaliation by an employer if the individual files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order. Alternatively, if the employer does not wish to provide this notice in the contract or agreement itself, it can be set forth in an employer policy that is cross-referenced in the agreement.
The remedies provided by the DTSA include damages for actual loss and unjust enrichment or a reasonable royalty for the unauthorized use, exemplary damages for willful or malicious misappropriation, injunctive relief, attorneys’ fees for bad faith misappropriations and ex parte seizures which would allow an employer to ask the government to seize misappropriated trade secrets without notification to the alleged wrongdoer.
It is imperative that employers act quickly to modify their contractual language to include the appropriate immunity provision in all contracts and agreements with nondisclosure provisions entered into or amended after May 11, 2016. If an employer does not take this action, the employer will not be able to fully avail themselves of the remedies the DTSA offers.
If you have any questions regarding how to adjust or draft your agreements to be in compliance with the DTSA, please contact Laura Pfeiffer at 612.604.6685, lpfeiffer@winthrop.com or Mark Pihart at 612.604.6623, mpihart@winthrop.com.