Trade secrets are valuable. The owner of a trade secret must take reasonable measures to protect the trade secret. The reason measures can include limiting access on a need-to-know basis and the agreements put in place. For example, when an employer sues an employee for stealing a trade secret, the court will ask whether the employee signed a trade secret or confidentiality agreement. Not having an agreement would be a serious setback for the employer.
A well-drafted trade secrets agreement is useful, while a poorly drafted agreement can backfire. Anyone using those agreements should regularly review the agreements for updates. For example, in May 2016, the federal Defend Trade Secrets Act of 2016 (“DTSA”) became law. The DTSA opens the federal courts to more civil cases over trade secret misappropriation. The DTSA also imposes a notice requirement on employers. An employer that fails to comply with the notice requirement, when required, will limit what the employer could recover under the DTSA.
Employers that use trade secrets or confidentiality agreements need to have a notice of the whistleblower protections in the DTSA. The requirement applies to contracts entered into or renewed on or after when the law came into effect. The employer also can comply by having the agreement cross-reference a policy document that has the required notice. What is unclear is whether the notice can be a summary of the whistleblower rights, a repeat of the statute, or something else.
An employer that does not include the notice when required will not be able to get punitive/exemplary damages or an attorney’s fee award on a DTSA claim in a lawsuit against an employee. Regardless of whether state law or the contract covers that “gap,” it makes sense for an employer to include the notice when required to preserve as many options as possible.
It pays for an employer to review its agreements going forward for DTSA compliance, and to make sure the agreements still meets the employer’s needs. The recent DTSA gives employers and others an excuse to review their agreements.
We are happy to assist employers and others with their policies, procedures, and agreements. Feel free to give us a call.
This post provides general information only. This post is not intended to create an attorney-client relationship or to be legal advice about your situation. Laws change and your situation may be different. You should consult with a licensed attorney for legal advice specific to your circumstances.
© 2016 Matthew D. Macy