One of the challenges that businesses may face is how to keep and maintain confidential information from other individuals or companies. Leakage of trade secrets can negatively impact an organization if the secret falls into the hands of another business or person. In an effort to protect trade secrets and make enforcement more uniform, the federal government recently enacted the Defend Trade Secrets Act of 2016.
History
Prior to the enactment of the Defend Trade Secrets Act (DTSA), trade secrets were traditionally covered by individual state laws and some federal laws that provided both civil and criminal penalties if computerized data was used or if trade secrets were misappropriated. Additionally, the majority of states had enacted the Uniform Trade Secrets Act (commonly known as UTSA). However, the UTSA is not uniform with regards to owners of trade secrets who are trying to get relief. Furthermore, UTSA also makes it difficult for people or companies who misappropriate information to be chased across state lines or to get information from individuals who live in another state or country. In an effort to try and streamline the trade secret process, the DTSA was proposed and ratified.
Legislation
The DTSA, which was passed by both houses of Congress and signed into law by President Obama, establishes a federal course of action for misappropriation of trade secrets that supplements existing state laws and statutes. For example, owners of trade secrets now have the option to choose between federal or state court when there is a misappropriation of trade secrets. In addition, the person or business that holds the trade secret also has the option to get an ex parte seizure order when they may not have the option to gain a similar seizure order otherwise.
(Ex Parte Seizure Order is when the plaintiff can see a judge and request seizure of information, equipment or other materials without the defendant or their attorneys present to object to the request. Think of it like a private meeting with the judge, without the other side present.)
Changes
There are also several elements that individuals and companies need to be aware of with the implementation of the DTSA. First, there is limited immunity to whistleblowers that provide trade secrets in confidence to a government official or a lawyer for the sole purpose of reporting or investigating a suspected violation of the law. In addition, individuals will also be immune if they make a disclosure in a complaint or other document within a lawsuit, provided that the disclosure was made under seal.
At the same time, all employers are now required to provide the whistleblower immunity to all workers who enter into a contract or agreement that deals with confidential information, including the use of trade secrets. This provision needs to be included in all employee contracts after the enactment of the DTSA. If a company fails to implement this clause into the contract, then the business may not be eligible to receive exemplary damages or attorney fees in a lawsuit.
Opinions
There are a wide range of opinions regarding the DTSA. One school of thought is that the enactment of the DTSA will allow more consistency throughout the nation. Individuals and businesses in every state will know what is expected of them and what they need to do in order to comply with the law. At the same time, companies will be forced to evaluate their contracts and reword them in a manner that protects their interests while also protecting the interests of their workers.
However, there are people who may try to use the DTSA to their advantage. They may do so by being more likely to expose trade secrets than they were before since they know that they could be shielded from liability. In addition, companies may not want to provide any information about their trade secrets with the intent of avoiding any long-term exposure.
Analysis
The enactment of the DTSA can benefit both workers and organizations alike. Businesses that have a trade secret will be forced to revise their documents so that they include the necessary language to take advantage of the DTSA. In addition, companies will be forced to evaluate who they do business with and make sure that they enact the correct policies to cover any independent contractors that they may do business with. Furthermore, the organizations will need to revise their whistleblower policies to include all the required notices. Lastly, all companies will need to have procedures in place to better document all activities so they are aware of what is taking place within the organization.
At the same time, employees will have a better understanding of what their rights and duties are. Workers will know that there are safeguards in place when they act as a whistleblower regarding suspicious activity. Additionally, the individual will know that there are procedures in place to prevent the business from negatively retaliating against them. If there is any retaliation, the business will know what the effects are and what they may or may not receive with regards to damages.
Conclusion
A business may have a wide range of questions regarding how the DTSA may affect their organization. By the same token, an individual may be unsure how they are protected under the new legislation. If a person or company has any questions, it can be useful to speak with a business attorney. The lawyer can help explain how the new law will protect both sides as well as the duties for all involved parties. At the same time, an attorney can explain what the company should do to protect their interests. For example, a lawyer can offer insight as to how the business should word any documents so that they are protected when a trade secret lawsuit arises.
At the same time, an attorney can also discuss with an individual what their rights are under the DTSA. The lawyer can explain what protections the worker has if they are a whistleblower in a trade secret lawsuit. Furthermore, the lawyer can discuss what would potentially happen to an employee if they are not protected under the DTSA. Lastly, if the person does not have any rights, the attorney can explain what potential penalties or ramifications the person would be facing.
r.w.