Protecting Your Business Assets: Nationalized Trade Secret Protection Has Arrived

By Joseph S. Heino

Today marks a day of success for inventors across the United States. From recipes and formulas to processes and design, U.S. businesses now have a new method of defense in the quest to safeguard their valuable trade secrets from would-be thieves and rogue employees. President Obama signed the Defend Trade Secrets Act of 2016 (“DTSA”) into law, creating a new federal cause of action for the misappropriation of trade secrets. Until today, the owners of trade secrets had to rely on state-by-state protections for their trade secrets – and not all protections were created equal.

The DTSA has been a long time coming. Unlike patents and copyrights, which derive their protections from constitutional mandate, and trademarks, which derive protections from the Lanham Act (via congressional reliance on the commerce clause), trade secrets were the last bastion of intellectual property governed solely by state laws. Enactment of the DTSA is expected to have a significant impact as to how, and to what extent, owners of trade secrets will avail themselves of this new law. In particular, it provides a strengthened layer of prevention by allowing businesses a choice between state and federal courts as part of their litigation strategy.

So what’s next? There is at least one provision of the DTSA that should be considered by all employers immediately. Specifically, the DTSA contains certain “immunity provisions” that protect whistleblowers and prevent employer retaliation. Effective as of May 12, 2016, employers must give notice of the immunity provisions in any contract or agreement with an employee that governs the use of a trade secret or other confidential information. This provision applies only to contracts that are entered into or updated after tomorrow. This does not necessarily require employers to replace existing contracts with new ones, but it would be advisable for employers to consider a notice of policy amendment. Further, and in view of the expansive definition of “employee” under the DTSA, there may be a need to examine independent contractor and consulting agreements as well.

If you have any questions regarding the advantages or potential implications of this new law on your business or on protecting your intellectual property, please contact your Davis & Kuelthau attorney or the author, Joseph Heino, at 414.225.1452 /