Newly Enacted Defend Trade Secrets Act Requires Employers to Revise Agreements Now to Preserve Maximum Remedies

by Wilson Sonsini Goodrich & Rosati
Contact

On May 11, 2016, we reported in a WSGR Alert that under the new Defend Trade Secrets Act (DTSA), employers seeking exemplary damages or attorneys' fees in a trade secrets misappropriation action must provide employees with notice that, in certain circumstances, the DTSA grants immunity from civil or criminal liability to individuals who confidentially disclose an employer's trade secrets. Such circumstances include instances in which an individual discloses a trade secret in a complaint or other document filed in a lawsuit, but files the trade secret(s) under seal. Similarly, immunity may exist if an individual discloses a trade secret in confidence to a government official solely for the purpose of reporting or investigating a suspected violation of law. This notice condition, however, raises issues as to how, when, and even if employers should provide this notice.

The DTSA does not technically require employers to provide the notice in question. It simply limits recovery options if no such notice is provided to employees. Therefore, employers must initially decide between: (1) providing employees notice that under certain circumstances, they can—with immunity from civil or criminal liability—confidentially disclose company trade secrets (to the government, in a court proceeding, or to an attorney); or (2) foregoing the opportunity to pursue exemplary damages and attorneys' fees under the DTSA when, for example, an employer proves an employee willfully and maliciously misappropriated its trade secrets. In making this decision, California employers should note that under the California Uniform Trade Secrets Act, these same remedies are available, whether or not the employer provides the DTSA's notice of limited immunity.

While the decision as to whether to provide notice is ultimately a business decision, it is clear that providing the notice as set forth in the DTSA affords employers greater remedy options in a trade secrets misappropriation action, and also makes suing in federal court a more viable path. As a result, most employers will likely opt to provide the notice described in the DTSA.

Employers electing to provide notice of the DTSA's limited immunity should take immediate steps to revise their agreements so as to comply with the DTSA's requirements. That is because the DTSA's notice requirements are applicable to all contracts and agreements that are entered into or updated after the date on which the DTSA became law—May 11, 2016. While employers need not modify existing agreements with their current employees or contractors (but should do so where a new agreement is entered into with such existing employees), going forward, employers should make sure that they revise any agreement used with new employees that "governs the use of a trade secret or other confidential information," including, where applicable, confidentiality or proprietary information agreements, invention assignment agreements, non-disclosure agreements, and/or employment agreements.

In addition to updating their agreements with employees, companies should be sure that their consultant/independent contractor agreements contain the DTSA limited immunity language, since the DTSA defines an employee to include "any individual performing work as a contractor or consultant for an employer." Employers should also consider whether release or separation agreements entered into with current employees should comply with the DTSA's notice provisions. This is particularly true when such agreements specifically address an employee's or consultant's need to preserve the trade secret or confidential status of company information. Finally, an employer may elect not to include the necessary language in an employee agreement if the agreement instead makes specific reference to a company policy that contains the notice language. Of course, in that event, the employer will need to modify the specific employee handbook or other stand-alone policy to include the specified notice language.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Wilson Sonsini Goodrich & Rosati | Attorney Advertising

Written by:

Wilson Sonsini Goodrich & Rosati
Contact
more
less

Wilson Sonsini Goodrich & Rosati on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.