New Protection for an Employer’s Trade Secrets Under the Defend Trade Secrets Act of 2016 (DTSA)
The DTSA was enacted on May 11, 2016 and provides a new tool in the fight to protect trade secret information. Under the DTSA, a “trade secret” is defined as
- Information that is not generally known to the public;
2. Information that is subject to efforts to maintain its secrecy; and
3. Information that has independent economic value.
Trade secrets can be valued and used as collateral for financial transactions. An owner of a trade secret that is misappropriated may bring a civil action in federal court so long as the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce. The DTSA does not replace state laws governing trade secrets. Instead, it was enacted to combat trade secret theft that occurs in the U.S. and around the world and in response to the harm that results from trade secret theft.
Remedies available under DTSA include:
- Injunction to stop misappropriation.
- Damages based on actual loss, unjust enrichment or royalty.
- If misappropriation is willful and malicious, statutory damages equal to two times damages.
- If misappropriation is willful and malicious, attorney’s fees are recoverable.
DTSA provides immunity for certain disclosures of trade secret information if disclosed in confidence to a government official, to an attorney for the purpose of reporting or investigating a suspected violation of law, or in a complaint or other document filed in a lawsuit or other proceeding if made under seal. The Act also requires that employers notify employees and contractors of their immunity rights under certain circumstances. As a result, employers should review their employee handbooks to update any policies and post notice for employees to ensure they are in compliance with the DTSA. The DTSA provides employers with another good reason to inventory their trade secret assets and confirm that all steps have been taken to protect their trade secret assets.