President Obama signed the “Defend Trade Secrets Act of 2016” into law on May 11th. The Act amends the Economic Espionage Act of 1996 to provide a federal private right of action for trade secret misappropriation and theft. Remedies include actual damages, injunctive relief, and exemplary damages and attorneys’ fees for willful and malicious misappropriation. The Act does not preempt state law, meaning that plaintiffs will now have the option of proceeding under either state or federal law when faced with a threat to trade secrets.
The Act also provides immunity for certain disclosures made to government officials or attorneys. Specifically, the Act provides that an individual may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (1) in confidence to a government official or an attorney, solely for the purpose of reporting or investigating a suspected violation of law; or (2) in a complaint or other filing in a lawsuit or other proceeding, if such filing is made under seal. Likewise, an employee who files a retaliation lawsuit for reporting a suspected violation of law may disclose the trade secret to his or her attorney and may use the trade secret information in a court proceeding if the individual files any document containing trade secret information under seal and does not disclose the trade secret except pursuant to court order.
Importantly, effective May 11, 2016, the Act requires employers to provide notice of this immunity in any contract or agreement with an employee that governs the use of trade secrets or other confidential information. Employers who fail to provide the required notification cannot recover attorneys’ fees or exemplary damages under the Act. The notice of immunity can be done in one of two ways. One way is to incorporate fully the notice of immunity into confidentiality agreements. The second way is to put the notice of immunity in the company’s policy for reporting a suspected violation of law, and then to cross-reference that policy in confidentiality agreements. For simplicity, we recommend that employers reproduce the statutory language in the notice of immunity.