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Are your confidentiality agreements up to date?

By Stacey Mark
April 27, 2017

The Defend Trade Secrets Act (DTSA) provides an important tool for protecting trade secrets from misappropriation by affording owners a federal right of action for misappropriation of trade secrets related to a product or service used, or intended for use in interstate or foreign commerce.  The DTSA provides a variety of remedies that track those available under state uniform trade secret statutes, such as actual damages, damages for unjust enrichment, royalties, injunctive and exemplary relief, and attorney fees.     

However, the DTSA differs from uniform state laws in some significant respects.  The DTSA provides, in extraordinary circumstances, for the ex parte seizure of property to prevent the propagation or dissemination of the trade secret.  The DTSA further expands trade secret protection by enabling trade secret owners to seek nationwide relief, without preempting state law remedies. Another significant feature of the DTSA is the immunity from criminal and civil liability it provides to whistleblowers who comply with the Act's reporting provisions.  

Employers are required to notify employees and contractors who are subject to confidentiality agreements of the DTSA's immunity provisions.  An employer may comply by including the notice in the confidentiality agreement, or by including a cross-reference to a policy document provided to the employee that sets forth the employer's reporting policy for suspected violations of the law.  An employer that fails to comply with the notice requirement may not be awarded exemplary damages or attorney fees in an action under the DTSA.  The statute applies to contracts governing confidentiality entered into on or after May 11, 2016.

Confidentiality provisions are commonly included in employment and independent contractor agreements, confidentiality/proprietary rights agreements, noncompete and nonsolicitation agreements, and in separation/release agreements, among other employment documents. Employers who have written contracts with employees or contractors entered into on or after May 11, 2016, containing confidentiality obligations should consider adding the DTSA disclosure and perhaps also reviewing their handbook.

Employers may contact Ater Wynne's employment group for assistance with DTSA compliance.