The Defend Trade Secrets Act (“DTSA”) of 2016 that became effective May 11, 2016 creates a federal private cause of action for trade secret misappropriation and provides remedies including injunction, damages, exemplary damages up to two times the amount of damages for willful and malicious appropriation, and reasonable attorney’s fees for the prevailing party under certain circumstances. But it also provides immunity to employees who disclose trade secrets under limited circumstances and requires that you, the Employer, provide notice of these immunity provisions to your employees if you want to take full advantage of the remedies provided to you by the DTSA.
Employee Immunity Provisions under the DTSA
The DTSA provides employees, defined to include individuals working as contractors or consultants, with immunity from civil and criminal liability for confidential disclosure of an employer’s trade secrets made either:
The DTSA also allows an individual to disclose the employer’s trade secrets in an anti-retaliation lawsuit against the employer if the employee:
Employer Notice Requirement
Employers are required to provide notice of these immunity provisions to employees in any contract or agreement entered into or modified after May 11, 2016 that governs the use or disclosure of a trade secret or other confidential information including:
Failure to provide notice to employees can be costly to an employer. Without the appropriate disclosures, the DTSA prohibits the employer from recovering exemplary damages, which may be up to two times the amount of actual damages, and attorney’s fees.
What must your notice include? While the DTSA does not state how detailed the notice must be or what it must say, to be on the safe side, an employer’s notice should copy the DTSA’s immunity provisions verbatim. However, these may be too lengthy to include in every communication or agreement. Therefore, the DTSA allows employers to provide a cross-reference to a policy document that includes the immunity provisions. Such a document should be acknowledged in writing by the employee and should contain the following:
Review and Update Your Documents
While employers will not be penalized if existing documents do not contain the notice provision, any agreements that were entered into or modified after May 11, 2016 must contain this notice provision if the employer ever wants to pursue exemplary damages and attorney’s fees under the DTSA. We advise you to perform an inventory of your agreements with employees, contractors, and consultants and any documents governing trade secrets and confidential information to ensure they contain the necessary language. Please contact us with any questions. We will be happy to help you update your agreements and/or draft a policy document that includes the appropriate language so that your company can take full advantage of the remedies offered under the DTSA.