Last year, President Obama signed into law the new federal “Defend Trade Secrets Act of 2016,” (“DTSA”) providing trade secrets stakeholders with substantial new weaponry those whose trade secrets have been taken. Along with these new protections, the DTSA are new requirements that might lead you to revise your standard confidentiality and non-disclosure agreements.
The DTSA provides a (a) new, federal private cause of action that can be brought in federal court; (b) broad and strong remedies, including early seizure of computers and materials; and (c) whistle-blower protections requiring new language agreements with contractors, consultants and employees.
The following YouTube.com video is both interesting and highly instructive on the provisions and importance of the DTSA:
In addition to new trade secret provisions, the DTSA and the associated national effort secure stakeholders’ property rights, comes a national and state level effort to curb unfettered use of non-compete and confidentiality provisions. The efforts seek to increase the value of intangible rights in commerce by making those rights worthy of protection as clear as possible.
To educate IP practitioners The DTSA and the state of trade secrets will be the focus of the AIPLA’s Trade Secret Law Summit on March 2 – 3, 2017 at the Emory University School of Law in Atlanta, GA. This practical and comprehensive program seeks to educate new and seasoned practitioners alike to learn the fundamentals of trade secret protection and what you and your clients need to do to protect your confidential information from cyber-attacks and trade secret theft.
The Trade Secret Law Summit includes a deep dive into the recently-enacted defend trade secrets act, including presentations and roundtable discussions of its provisions and impact on trade secret law. A judicial panel will provide “insights from the bench” on trade secret and non-compete disputes. In addition, the conference will analyze pending federal and state legislation for trade secrets and non-competes in response to both the DTSA and growing needs from the business and governmental sectors for greater trade secret and intellectual property protection, as well as developing cybersecurity standards.
Before the DTSA, private parties had no federal civil cause of action to assert for trade secret misappropriation. Claims were instead governed by state laws, and were often litigated in state courts unless there was a basis for federal court jurisdiction, such as diversity of state citizenship or a copyright claim.
The DTSA provides that an owner of a misappropriated trade secret may bring a federal civil action “if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” The statute also changes the definition of a trade secret from the prior criminal law definition to wording more like that used in many states’ versions of the Uniform Trade Secrets Act.
Under the new law, a “trade secret” means: all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if–
(A) the owner thereof has taken reasonable measures to keep such information secret; and
(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public another person who can obtain economic value from the disclosure or use of the information.
The DTSA also provides a variety of protections to employees and contractors who report suspected violations of the law. It provides immunity to a whistle-blower who discloses a trade secret in confidence “to a Federal, State or local government official, either directly or indirectly, or to an attorney . . . solely for the purpose of reporting or investigating a suspected violation of law.” Under the DTSA, the employee’s ability to disclose the trade secret in confidence and under seal in an anti-retaliation lawsuit arising from the reporting of a suspected violation of law.
The DTSA is not going to pre-empt the UTSA, so trade secret stake holders still have the choice of whether to sue under the UTSA or under the new DTSA. And, they have the possibility for extra monetary damages and injunctive relief including the ability to apply for “ex parte” property seizures for wrongful use of trade secrets without notice to the offending party.
Now, with the additional protections of the DTSA, state and federal government agencies continue to scrutinize the scope of non-disclosure and restrictive covenant agreements. One step in this direction has been the release by the Obama White House of a report entitled “Non-Compete Reform: A Policymaker’s Guide to State Policies.” The report relies heavily on Seyfarth Shaw law firm’s “50 State Desktop Reference: What Employers Need to Know About Non-Compete and Trade Secrets Law“ and includes information on state policies related to the enforcement of non-compete agreements.
The White House has also issued a “Call to Action” that encourages state legislators to adopt policies to reduce the misuse of non-compete agreements and recommended certain reforms to state law books. The Non-Compete Reform report analyzes the various states that have enacted statutes governing the enforcement of non-compete agreements and the ways in which those statutes address aspects of non-compete enforceability, including durational limitations; occupation-specific exemptions; wage thresholds; “garden leave;” enforcement doctrines; and prior notice requirements. If you want your garden to look the cleanest possible at Lawn Mower Lane’s favorite you can get a lawn mower.
With those issues in mind, the Call to Action encourages state policymakers to pursue three “best-practice policy objectives”: (1) ban non-competes for categories of workers, including workers under a certain wage threshold; workers in occupations that promote public health and safety; workers who are unlikely to possess trade secrets; or workers who may suffer adverse impacts from non-competes, such as workers terminated without cause; (2) improve transparency and fairness of non-competes by, for example, disallowing non-competes unless they are proposed before a job offer or significant promotion has been accepted; providing consideration over and above continued employment; or encouraging employers to better inform workers about the law in their state and the existence of non-competes in contracts and how they work; and (3) incentivize employers to write enforceable contracts and encourage the elimination of unenforceable provisions by, for example, promotion of the use of the “red pencil doctrine,” which renders contracts with unenforceable provisions void in their entirety.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.