Defend Trade Secrets Act of 2016 and Employment Agreements

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On May 11, 2016, President Obama signed the Defend Trade Secrets Acts of 2016 (DTSA) into law and the law took effect immediately. It provides federal civil remedies for misappropriation of trade secrets and aligns the definition of trade secrets with the Uniform Trade Secrets Act, which most states have adopted.

The Act prohibits a wide range of conduct from theft to violation of a preexisting duty owe by the defendant or even by some third party. Such a preexisting duty may be express, arising from a contract or implied, such as the duty of employees to protect the trade secrets of their employers.

There are two ways a person or company may be found liable in a civil action for misappropriation of trade secrets under the DTSA: (1) acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or (2) disclosure or use of a trade secret of another without express or implied consent.

Employment agreements needs to be updated if they include language about misappropriation of trade secrets. It makes sense to review your agreements to preserve all rights and to make sure employees are aware of their rights under the new law. For example, the DTSA does provide protections to employees divulging trade secrets for whistleblowing purposes. DTSA cannot be used to restrict employees from moving to jobs with competitors. Companies will still have to look to state law and restrictive covenants to protect them in that arena. State law is not pre-empted by the DTSA.

Please call Tracy Stroud with questions about employment law or other civil litigation issues at 252-321-2020.