Currently, trade secrets are only protected at state level, but with the Defend Trade Secrets Act (DTSA), they could also gain protection on a federal level. This act has passed both houses of Congress and the House of Representatives and is now being sent to President Obama for his approval.

Some of the Defend Trade Secrets Act’s important provisions will impact the best practices for protecting trade secrets.

Confidentiality Agreements

For employers, the immediate impact of the act will be the new requirements for employment and contractor agreements affecting confidential information. The DTSA provides criminal and civil immunity for employees and contractors who

1. Disclose trade secrets in confidence to the government or their lawyers solely for the purpose of reporting or investigating a suspected violation of law
2. Disclose trade secrets to their personal attorneys in connection with a lawsuit alleging retaliation for reporting a suspected violation of law
3. Disclose or use the trade secret in any complaint or other document filed in a lawsuit, as long as the trade secret information is filed under seal

The act also provides that employers shall provide notice of the foregoing immunity in any contract with an employee or contractor that governs use of a trade secret or confidential information. Employers can comply with this by providing a cross-reference to a policy document provided to the employee or contractor that outlines the employer’s policy for a suspected violation of law.

Federal Standard

The DTSA is creating a single federal framework for trade secrets misappropriation lawsuits to have a relatively uniform body of case law for these disputes. However, it does not preempt state laws that already address trade secrets protection.

Remedies

The act also allows employers to file civil lawsuits in federal court for trade secret misappropriation by departing employees. With cross-state and international concerns, federal courts could see better outcomes in these cases.

Ex Parte Seizures

Lastly, the DTSA includes a provision allowing judges to issue ex parte civil seizure orders of property if an employer shows that the order is necessary to prevent a trade secret from being made inaccessible to the court by being destroyed, moved, hidden etc.

With the implementation of the DTSA imminent, employers should meet with their in-house attorneys to review and update policies and contracts to comply with the DTSA’s provisions.