Posted on 6/23/2016 12:54:39 AM By Partridge Partners

By Colin O'Brien and Daniel Rogna

Last month our colleague, Lexy Payne, provided an overview of the Defend Trade Secrets Act (“DTSA”) which can be found here.

While many companies will never need to use the DTSA, the law contains provisions going forward that could affect all companies by requiring a change of language in NDA’s and employment contracts. Specifically, the DTSA requires all employers to include a notice of whistle blower immunity in any contracts entered into or updated after May 11, 2016, with individual employees, contractors or consultants, which governs the use of a trade secret or other confidential information.

The relevant portions of the new law are found in the following sections:

  • DTSA sec. 1833(b) provides immunity for disclosure of trade secrets under certain circumstances;
  • Sec. 1833(b)(3)(A) requires an employer to “provide notice of the immunity set forth in this subsection in any contract or agreement with an employee that governs the use of a trade secret or other confidential information;”
  • Sec. 1833(b)(3)(B) states “[a]n employer shall be considered to be in compliance with the notice requirement in subparagraph (A) if the employer provides a cross-reference to a policy document provided to the employee that sets forth the employer's reporting policy for a suspected violation of law;” and,
  • Sec. 1833(b)(4) states, “For purposes of this subsection, the term ‘employee’ includes any individual performing work as a contractor or consultant for an employer.”

Moving forward, companies will need to pay attention to new third party consultant or contractor agreements they enter into to ensure reference is made to the DTSA. We suggest companies also consider a policy manual update to govern all existing and future employee contracts. In order to provide adequate notice companies should consider using the following language in new employee documents: Misappropriation of trade secrets in violation of the terms of this agreement constitutes an offense punishable under federal and state law. However, under 18 U.S.C. sec. 1833(b), you may be immune from liability if you confidentially disclose a trade secret to a government agent, or in a court filing, for the sole purpose of reporting or investigating a suspected violation of law by the owner of a trade secret.

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"Trade Secrets"