Defend Trade Secrets Act and Whistleblower Protections
The Defend Trade Secrets Act of 2016 (“DTSA”) was signed into law and became effective May 11, 2016. The DTSA grants federal jurisdiction over private civil actions for the misappropriation of trade secrets and allows owners of trade secrets to choose either state courts under Nebraska common law or the Nebraska Trade Secrets Act, or in federal court under the DTSA. The DTSA is not retroactive and only applies to misappropriations that occur on or after May 11, 2016.
In general, in order to qualify as a “trade secret” the owner must have taken reasonable measures to keep such information secret, and the trade secret must derive independent economic value from not being known by others.
If an organization makes a successful DTSA claim against an employee, contractor, or consultant, it could be awarded exemplary damages and attorney’s fees, but only if it properly explains the new DTSA whistleblower protections in an employee handbook or contract. The DTSA provides whistleblowers with immunity from any criminal or civil liabilities arising under Federal or State trade secret law in specific circumstances. Employers must notify their employees, contractors, and consultants about the whistleblower immunity provisions in any contracts or agreements regarding the use of trade secrets or other confidential information in order to be eligible to win exemplary damages and attorney’s fees.
In addition to the notice requirement, employers must also establish a policy regarding reporting suspected violations of the law and cross-reference the policy in any employee handbooks or contracts. While the notice requirement only applies to contracts and agreements entered on or after May 11, 2016, employers should update all employee handbooks, independent contractor agreements, consultant contracts, non-disclosure agreements, franchise agreements, and executive contracts to address the new whistleblower provisions.
Sean T. Nakamoto, Summer Associate