Do Your Employment Agreements Comply with the Defend Trade Secrets Acts of 2016?
This week, President Obama signed into law the Defend Trade Secrets Act of 2016. This new law does not replace current state laws on trade secrets; instead, it merely gives parties a potential new venue to pursue trade secret claims. Remedies include injunctive relief, actual damages, “exemplary damages” in cases in which a trade secret is “willfully and maliciously misappropriated,” attorney’s fees to the prevailing party in certain situations, and even ex parte seizure of “property necessary to prevent the propagation or dissemination of...trade secrets” in very limited circumstances.
The law has a three year statute of limitations.
All employers should note a provision tucked in at the very end of the law that deals with “immunity” issues. Under Section 7, an individual is not subject to criminal or civil liability for the disclosure of a trade secret a) made in confidence to a government official or an attorney solely for the purpose of reporting or investigating a suspected violation of the law or b) made in a complaint or other document filed in a lawsuit if such filing is made under seal.
Importantly, the Act requires employers to “provide notice of the immunityin any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” The full notice does not have to be in the contract or agreement if there is a reference “to a policy document” in the contract or agreement. In other words, it is okay if you have a general policy document -- say your handbook provision on trade secrets -- that refers to the immunity granted under the Act, and your confidentiality agreements make reference to that handbook provision. Failure to provide notice to an employee you later sue for a trade secrets violation can cut off specific remedies, including exemplary damages for willful and malicious misappropriation of trade secrets and attorney’s fees.
The bottom line – with the recent changes to Arkansas law on covenants-not-to-compete and the passage of this new federal act related to trade secrets, now is a good time to review all of your written employment agreements.