President Obama signed into law yesterday the Defend Trade Secrets Act of 2016 ("DTSA"). The DTSA becomes effective immediately, and provides a federal cause of action for trade secret misappropriation. It provides an important new means for businesses to protect their intellectual property.
All employers must be aware of one significant requirement of the DTSA for which a failure to comply will limit their remedies under this sweeping new law. The DTSA provides all individuals with immunity from liability for confidential disclosure of a trade secret to the government or in a court filing. The DTSA mandates that all employers provide notice of this immunity in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.
To encourage employers to provide notice of this new immunity, the employer is foreclosed from being awarded exemplary damages or attorney's fees in an action under the DTSA against an employee to whom notice was not provided. The notice requirement applies to all agreements that are entered into or updated after the enactment of the DTSA. Therefore, moving forward, all employers are strongly encouraged to review their employment agreements that govern the use of trade secret or other confidential information to ensure that such agreements satisfy that notice requirement.