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TIME TO UPDATE EMPLOYMENT AND CONFIDENTIALITY AGREEMENTS IN VIEW OF NEW TRADE SECRETS LAW

A new federal law on trade secrets has recently been enacted that should require a change in non-disclosure and employment agreements that address confidential information.

The Defend Trade Secrets Act was signed into law in May of this year.  This new law provides for trade secret misappropriation to be brought in federal court according to the provisions of the new law.  Trade secret misappropriation was previously a state law issue covered by the laws of the particular state where the misappropriation occurred. 

The new law defines three requirements for information to be considered as a trade secret: the information must be secret; the owner of the information must have taken reasonable measures to keep the information secret; and the information has value to the owner when it is kept as a secret.  The new law provides for the owner to recover damages and an injunction if the information is stolen.  For egregious situations, the owner may also obtain enhanced damages up to two times the awarded amount as well as to collect their attorney fees.

The new law provides immunity for an employee who discloses the information when reporting a possible trade secret misappropriation.  This whistleblower immunity provides for the employee to disclose the information to a government official or an attorney during the course of reporting the possible misappropriation.  If an employee is not made aware of this immunity and later takes or discloses a trade secret, the employer is not eligible to collect enhanced damages or their attorney fees.  Therefore, confidentiality and employment agreements should include a clause explaining the immunity to the employee.

The new law also includes other provisions, including the possibility of seizures, the relationship with existing state trade secret laws, the definition of an employee, employees that change jobs and misappropriation that occurs outside of the United States.

Please contact us if you would like more information on this new law.

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