You probably already know that the federal Defend Trade Secrets Act (DTSA) makes available to employers a number of significant remedies, but what you may not know is that several of those remedies are contingent on employers notifying employees of key whistleblower protections provided for in the Act.
Enacted in 2016 with nearly unanimous bipartisan support, the DTSA created significant new protections for employers against those who would steal (or threaten to steal) their trade secrets. Of particular note, the DTSA allows businesses to bring a cause of action for trade secret misappropriation in federal court (which was previously unavailable barring special circumstances), obtain an injunction prohibiting the use of trade secrets while the case is pending, and recover damages for actual loss, unjust enrichment, exemplary damages, and attorney’s fees. The law even makes available, in limited circumstances, civil seizure. Yes, that’s right – the court can actually send law enforcement officials out to seize property as is “necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.”
Most employers operating in trade secret intensive industries have gained general familiarity with these better-known remedies under the DTSA. However, what some businesses may not realize is that not all of these remedies operate automatically. Specifically, an employer can only recover attorney’s fees and exemplary damages in a DTSA action against an employee if they have provided certain “whistleblower immunity” notice to their employees.
The DTSA immunizes from criminal or civil liability any employee who discloses trade secrets to a government official or an attorney for the purpose of reporting or investigating a suspected violation of law. In order for an employer to recover attorney’s fees or exemplary damages, they must apprise their employees of this immunity. The notice must be set forth in “any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” The law also provides that an employer can comply by cross-referencing a policy document given to the employee explaining the employer’s policy for reporting suspected violations of law. The give and take is simple – provide the required notice in your confidentiality agreements or company policies, and gain the ability to recover exemplary damages and attorney’s fees. In that regard, the DTSA gives employers substantial ammunition to protect their trade secrets but also provides an outlet for employees to disclose trade secrets when required, without fear of reprisal. A small price to pay for substantial benefits to employer and employee alike.