President Obama signed into law the Defend Trade Secrets Act of 2016 on May 11. It creates a uniform, federal standard for the protection of corporate trade secrets.
What do employers need to know about this new law?
1. It creates a uniform federal cause of action for the misappropriate of trade secrets. Thus, companies, particularly, but not limited to, those that operate in more than one state, can seek nationwide relief from the misappropriate of trade secrets, without regard to differences in state law. Also, because it creates a federal cause of action, it grants access to federal court without regard to the state of citizenship of the parties.
2. It does not circumvent state laws regarding the enforceability of non-competition agreements. Employers are still free to limit their employees’ post-employment activities, subject to applicable state laws.
3. It does not preempt state trade secrets laws, to the extent they provide greater protections.
4. It creates a mechanism for the civil seizure of stolen trade secrets. In “extraordinary circumstances” a federal court may order the civil seizure of property “necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.” Moreover, interestingly, one of the pre-conditions on this seizure is that the “applicant has not publicized the requested seizure.”
5. One who claims to have an interest in any seized material move the court “to encrypt any material seized or to be seized … that is stored on a storage medium.”
10. Disclosure of trade secrets are protected if made in confidence to a government official, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law, or if made in a complaint or other legal document filed under seal in a lawsuit or other proceeding.
While this law may not change the legal status of trade secrets it does add another arrow to the corporate quiver of trade-secret protections, which most (honest) employers should welcome.