Whistleblower Protection in New Federal Trade Secrets Law

Saul Ewing Arnstein & Lehr LLP

On May 11, 2016, President Obama signed the Defend Trade Secrets Act of 2016 (DTSA), the long-proposed legislation that establishes a federal trade secrets law.  The DTSA amends the Economic Espionage Act — which currently only provides for criminal charges for trade secret misappropriation — to create a federal private civil cause of action.  Previously, private civil cases of trade secret misappropriation have been purely a matter of state law. 

One of the primary purposes of the DTSA is to make the law relating to trade secrets uniform through a single federal statute.  This will arguably allow for more predictable, nationwide case law to develop.  However, the new law will not eliminate or preempt state laws that already exist.  Thus, the DTSA may have the effect of adding a new layer of federal law on top of the divergent state trade secrets laws. 

Among other new provisions, the DTSA provides strong protections for corporate whistleblowers. It immunizes from civil and criminal liability under both federal and state trade secret law whistleblowers who disclose trade secrets “in confidence” to a federal, state or local government official, “either directly or indirectly,” or to an attorney, where such disclosure is “solely for the purpose of reporting or investigating a suspected violation of law.”  It also provides immunity for disclosures made by a whistleblower in a “lawsuit or other proceeding,” so long as that disclosure is made under seal.  

A whistleblower who files an anti-retaliation lawsuit against an employer may disclose the trade secret to the whistleblower’s attorney and use the trade secret information in a court proceeding as long as the whistleblower “(A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.”  

The DTSA also requires employers to provide notice to employees of their right to disclose and potentially use trade secrets in the limited circumstances described above.  

Please refer to https://www.congress.gov/bill/114th-congress/senate-bill/1890/text for a complete version of the law.


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.

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