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Key details about the Defend Trade Secrets notification requirement

Jason Schwent July 25, 2016

Most companies are aware that President Obama recently signed into law new federal trade secret protection, entitled the Defend Trade Secrets Act (DTSA). The DTSA provides protection for trade secrets similar to that found in the Uniform Trade Secrets Act (and its variants) that are currently employed in the states. Some companies may even be aware that the DTSA includes additional protection that current state law does not. One of those protections is protection from trade secret misappropriation liability for so-called "whistleblowers" in three circumstances:

  • if the disclosure of the trade secret is made to a federal, state, or local government official or an attorney for the sole purpose of reporting a suspected legal violation; 
  • if the disclosure is made in a complaint or other document filed in a lawsuit, provided the filing is made under seal; and 
  • if the trade secret is disclosed in connection with a retaliation lawsuit filed by the employee against the employer for reporting a violation of the law.

But what you may not know is that if your company does not advise your employees of this whistleblower protection, you may be prevented from recovering attorneys' fees or exemplary damages in trade secret misappropriation suits you file under the DTSA that have nothing to do with the whistleblower provision.

The DTSA allows trade secret holders who sue for trade secret misappropriation to collect both attorneys' fees as well as exemplary damages. But those enhanced recoveries are only possible if the trade secret holder has made its employees aware of the whistleblower immunity afforded by the DTSA. The DTSA makes these enhanced damages the carrot that entices companies to make sure their employees are aware of this new whistleblower immunity. And the stick for those companies who choose not to advise their employees of the protection is the unavailability of these enhanced damages for any suit brought under the DTSA.

Therefore, in order to avail yourself of the possibility of collecting attorneys' fees or exemplary damages under the DTSA, it is imperative that you advise all of your employers of the DTSA's whistleblower immunity. This notice should be included in all Confidentiality Agreements you have employees sign and incorporated into employee handbooks (where appropriate).