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New Law Expands Protections for Trade Secrets and Whistleblowers

May 25, 2016

top-secret-1239728On May 11, 2016, President Obama signed into law the Defense of Trade Secrets Act. This new law creates a private cause of action in federal courts for the misappropriation of trade secrets. Trade secrets include any proprietary information that the owner has taken reasonable measure to keep secret and that derives independent economic value due to its secrecy.

For employers, the new legislation means that if an employee or former employee discloses trade secrets without authorization, causing loss to the employer, the employer may file suit to recover damages for that loss, as well as additional damages for the employee’s unjust enrichment. Additionally, if the employee disclosed the trade secret “willfully or maliciously,” the employer may be entitled to three times the amount of damages, as well attorney’s fees.

In return, however, the statute grants new “whistleblower” rights to employees. If an employee, for the sole purposes of reporting or investigating a suspected violation of law, discloses a trade secret to a government official or attorney, the employee cannot be held liable under Federal or State trade secret law for that disclosure, and is further immune to a civil suit by the employer. The immunity extends to any disclosure of trade secrets in court documents filed under seal pursuant to a lawsuit, and to disclosures made in a court proceeding for a whistleblower retaliation lawsuit.

Employers are now required to include a notice of this whistleblower immunity in any contract or agreement with employees that governs the protection of its trade secrets or confidential information. This can often be satisfied by including appropriate language in employee handbooks. Failure to do so deprives employers the right to triple damages or to attorney’s fees in any trade secrets lawsuit against employees in federal courts.

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