As reported last week in our Global Business IP & Technology Blog, the Defend Trade Secrets Act is currently on President Obama’s desk awaiting his imminent signature. Once enacted, the new law will provide the first federal civil claim for misappropriation of trade secrets. Although the new law is monumental in several respects, at least two provisions are particularly noteworthy for US employers.
First, the law provides that a court will not grant injunctive relief for actual or threatened misappropriation in the event the injunctive relief would prevent an employee from entering into an employment relationship. Also, a court is authorized to place conditions on a new employment relationship only if the prior employer shows a threatened misappropriation based on more than merely information the person knows. These provisions were included in order to limit plaintiffs’ ability to pursue misappropriation claims based on an “inevitable disclosure” theory.
Second, the new law contains an immunity provision that is intended to protect individuals from liability for disclosing a trade secret in confidence to an attorney or government official in order to report a violation of law. Notably, the provision requires employers to provide notice of the new immunity provision in agreements that govern trade secrets or other confidential information. This can be done by providing the notice in the agreement itself or by providing a “cross-reference” to a policy that relates to reporting suspected violations of law. If an employer fails to comply with the statute, the consequence is that the employer may not recover punitive damages or attorney’s fees in an action brought under the new law. Interestingly, the provision defines “employee” to include an employer’s independent contractors and consultants.
The new law presents an opportunity for employers to refresh and update their agreements and policies relating to the confidentiality of trade secrets and to re-examine their practices designed to preserve the secrecy of proprietary information.