As the first year anniversary of the Defend Trade Secrets Act (DTSA) has just passed, it is worth taking a step back and taking stock of how courts have treated key provisions.  This will be the first of several posts covering developments under the DTSA and analyzing how it has been used since its enactment.

One of the most-discussed features of the DTSA was its creation of a “whistleblower” immunity that allows employees to share evidence of an employer’s alleged misconduct with government authorities or present that evidence in support of a retaliation claim under seal in court and avoid a claim that the employee misappropriated trade secrets when they disclosed that information. This provision, 18 U.S.C. §1833, is the only provision of the DTSA that preempts state law, so it affords protection to an employee against an employer’s claims under the Uniform Trade Secrets Act or common law as well.

As readers may recall, the DTSA requires employers who want to take advantage of the DTSA’s full protections to amend their contracts, employee agreements, and policies to provide notice of that whistleblower defense to its employees, which has been broadly defined to include independent contractors.  If a company fails to include that notice in its agreements or policies, it is foreclosed from seeking claims for attorney’s fees and exemplary damages under the DTSA.  The DTSA broadly defines an employee to include “any individual performing work as a contractor or consultant for an employer” so both 1099 and W-2 employees are covered under this provision.whistle 2

Not surprisingly, when the DTSA was enacted, many employers were concerned about what, if any notice, needed to be supplied to its employees about this immunity and to what extent they needed to amend their employment agreements and policies.  Section 1833(b)(3)(B) makes clear that an employer can comply with this notice provision if its employment agreement simply cross-references a policy document that more fully describes the employer’s reporting policy for a suspected violation of the law.  However, the DTSA does not define what kind of notice or language must be provided, so it remains an open question of whether a specific citation to the DTSA would be sufficient or whether the relevant language of the DTSA’s whistleblower provision needs to be included.

To date, there is only one case involving the DTSA’s whistleblower provision.  This should not come as too much of a surprise since the whistleblower provision’s primary consequences — a challenge to an award of attorneys’ fees or exemplary damages under the DTSA for failure to provide notice of that immunity  or the viability of the immunity itself– will generally require that a case have been fully litigated, something that has not happened with many DTSA cases.
Continue Reading The Defend Trade Secrets Act After One Year: The Whistleblower Provision

AT_YOUR_OWN_RISKWhen moving to enforce a non-compete, the last thing a litigator wants to do is to stumble out of the gates and struggle over a profound legal issue that could delay consideration of that normally urgent request.   A new and little-talked-about section of the Defend Trade Secrets Act (DTSA), however, has the potential to trip up employers seeking to enforce non-competes if they are not prepared to address this new entanglement.

There has been a significant amount of commentary about the DTSA and its new amendments since President Obama signed the DTSA into law on May 11, 2016. The “whistle-blower” immunity and ex parte seizure order, for example, have generated the most discussion to this point.  However, the section of the DTSA that may have the greatest future impact on litigation under the DTSA is 18 U.S.C. §1839(3)(A)(i)(1)(I), which prohibits injunctions that “prevent a person from entering into an employment relationship.”

That new provision, which I will refer to as the “No-Ban-on-Employment” provision, was intended to curb, if not eliminate, the use of the inevitable disclosure doctrine under the DTSA.  However, it may have a significant unintended consequence–namely, it may complicate employers’ efforts to enforce non-competes through temporary restraining orders (TRO), the key legal mechanism for non-compete disputes.  For the reasons below, employers may want to reconsider invoking the DTSA when they want to enforce their non-competes because of the potential complications of this section’s language and instead opt to file them in state court, at least in the short-term.  As the DTSA is likely to overtake the Uniform Trade Secret Act (UTSA) as the dominant statutory regime for trade secret law, this DTSA provision may well set another blow in motion to the viability of the non-compete as an effective tool to protect trade secrets.


Continue Reading Does the Defend Trade Secrets Act Contain a Potential Roadblock for Non-Competes? Why the DTSA’s Limitations on the Inevitable Disclosure Doctrine May Complicate Enforcing Non-Competes

Mitigating Your Trade Secret Risk When Hiring an Employee From a Competitor: The Trade Secret Litigator’s Five Golden Rules for On-Boarding A New Employee (Part II)
Continue Reading Mitigating Your Trade Secret Risk When Hiring an Employee From a Competitor: The Trade Secret Litigator’s Five Golden Rules for On-Boarding A New Employee (Part II)

The AIPLA Trade Secret Summit: High Points regarding Injunctions, Trade Secret Identification, High Tech Cases and Criminal Referrals
Continue Reading The AIPLA Trade Secrets Summit: High Points regarding Injunctions, Trade Secret Identification, High Tech Cases and Criminal Referrals

Highlights from the AIPLA Trade Secrets Summit: The Challenges of Trade Secret Litigation on the In-House/Outside Counsel Relationship
Continue Reading Highlights from the AIPLA Trade Secrets Summit: The Challenges of Trade Secret Litigation on the In-House/Outside Counsel Relationship

Sunday Wrap-Up (Aug. 25, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web
Continue Reading Sunday Wrap-Up (Aug. 25, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web

Thursday Wrap-Up (July 25, 2013): Noteworthy Trade Secret, Covenant Not to Compete and Cybersecurity News from the Web
Continue Reading Thursday Wrap-Up (July 25, 2013): Noteworthy Trade Secret, Covenant Not to Compete and Cybersecurity News from the Web

Friday Wrap-Up (July 19, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web
Continue Reading Friday Wrap-Up (July 19, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web

Cloudy, with a Chance of Litigation: The Weather Channel’s Trade Secret Woes Illustrate The Challenges of Licensing Database Information
Continue Reading Cloudy, with a Chance of Litigation: The Weather Channel’s Trade Secret Woes Illustrate The Challenges of Licensing Database Information

Wednesday Wrap-Up (July 10, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web
Continue Reading Wednesday Wrap-Up (July 10, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web