On May 11, 2016, the Defense of Trade Secrets Act (DTSA) was signed into law by President Obama. The DTSA was approved by both houses unanimously, in a rare bipartisan show of unity, and went into effect immediately. The DTSA is significant to business owners, as it gives a number of new avenues by which a business can protect itself from trade secret theft. However, it also places new obligations on businesses, even some that might think they don’t have “trade secrets”. This article discusses what has changed, and what employers need to know.
What is a Trade Secret?
At its most fundamental, a trade secret is information which has value. Many businesses are actually not aware that they DO have trade secrets, or that they SHOULD.
A trade secret can take many forms. It can be a secret component, not patented and hidden. It can be a secret ingredient. It can be a method of manufacturing something or a process for making it. It can be a business method or strategy. It can be a folder or a presentation that says “Confidential”. In fact, many small business owners, such as sales businesses and service industries, do not realize that a trade secret can even be something as seemingly straight forward as a client list. If it is not widely known, and it has value, it MAY be a trade secret.
Imagine something which you worked to build and develop, something that you carefully train your employees on. Imagine something which is of value to you and your business, and something that creates financial value to a business. It may be direct economic value, or it might create a market advantage. Imagine your business’ “secret sauce”.
If you have anything like this in your business, it is not publicly known, and it has value, then you should be protecting it. If you follow the right steps, it may be a trade secret.
What is the DTSA?
Put in legal terms, the DTSA has provided a federal cause of action and potential remedies in the event of a trade secret being misappropriated. In regular terms, the DTSA is a new Federal law which gives you new ways to fight having your trade secrets stolen. Powerful new ways.
Previously, if you were the victim of trade secret theft, your only legal option was to follow your particular state’s trade secret laws (with some specific exceptions). State laws can vary significantly and tend to be very limited in steps that you can take.
You can still bring your case to state court. However, now you can ALSO use the DTSA in Federal court, no matter where you are.
The DTSA also offers some new remedies. Remedies may be damages (money), and can now include your court costs and your attorney’s fees. Remedies can also be ways of stopping whoever took your trade secrets from using them, immediately. You can use the DTSA to stop the other side from using your trade secrets, but now you can even impound anything that contains (or may contain) those secrets. This is brand new, and has yes to be put to the test, but it can include files, laptops, hard drives, and even servers that may contain the information.
It is worth noting that the DTSA also has its own definitions for key terms that differ from state laws. Typically, when in state court, a trade secret is considered anything which has economic value to YOU, was not publicly known, and was protected through reasonable means. When bringing a federal case, under the DTSA, a trade secret now is anything where a) the owner has taken reasonable measure to keep the information a secret, and b) the information derives independent economic value, actual or potential, from not being generally known to the public. This means that you do not necessarily need to prove that the information IS valuable, but only that is COULD POTENTIALLY BE valuable.
YOUR New Obligations!
Unlike previously, ALL EMPLOYERS who have any sort of trade secret information, or think they may potentially have such information, are REQUIRED to update their employee contracts for new employees IMMEDIATELY. The contract now need to specify that employees are allowed to disclose information without fear of repercussions if it is to a government agent when the employee believes that they have a legal obligation to do so. This includes when they think your business may be doing something wrong. This “whistle blower” update to contracts is the price you pay for a lot of new ways to protect your business and your valuable work and investments.
The DTSA offers employers a number of very powerful new options in protecting their trade secrets. I urge all employers to consider their business and review whether they may have information or methods of value that should be protected by trade secrets. If so, seek intellectual property legal counsel to make sure that they have the proper protections in place, and to update their employee contracts accordingly, and in line with the DTSA, as soon as possible. Many attorneys offer a free consultation, so you have no reason not to immediately follow this new law and protect your business.