11th May 2016

On April 27, 2016, the United States House of Representatives voted 410-2 in favor of passing the Defend Trade Secrets Act of 2016 (DTSA) after the bill was unanimously passed by the Senate in April 2016. The White House strongly supports the passage of DTSA and President Obama on Wednesday, May 11, 2016, signed the DTSA into law.

The DTSA is perhaps the most significant addition to federal intellectual property law since the Lanham Act (protecting trademarks) was enacted in 1946.

For the first time, the DTSA will create a federal private right of action for trade secret misappropriation.  Historically, trade secret battles were primarily brought in state courts.  Although almost all states have adopted some version of the Uniform Trade Secrets Act, there exists some significant variation in both states’ statutes and the case law.  While the DTSA will not necessarily preempt state laws, it may permit a party to bring an action under a single body of law in federal courts.

However, the DTSA also contains an amendment that provides strong corporate whistleblower legal protections, including immunity from liability of confidential disclosure, which could encourage whistleblowers to come forward and report illegal misconduct. Whistleblowers, understandably, can be hesitant to speak up or provide documents which relate to corporate misconduct because they are afraid that they may put themselves at risk of retaliation or a counterclaim lawsuit from the company for “stealing” or using corporate trade secrets in their whistleblower case. The DTSA sets forth specific procedures for employees to obtain this immunity.

The DTSA amendment provides that an individual cannot be held criminal or civilly liable under any federal or state trade secret law who discloses trade secrets in confidence to a government official or to an attorney, solely for the purpose of reporting or investigating suspected misconduct. Whistleblowers also cannot be held liable under any federal or state trade secret law when trade secret information is disclosed in a lawsuit complaint or other lawsuit document that was filed under seal, such as a qui tam action.

Further, the amendment also provides immunity to a whistleblower who files a lawsuit for retaliation by an employer for reporting illegal misconduct and can now disclose trade secret information to an attorney and use that information in a court proceeding if the documents containing the trade secret information are filed under seal and not disclosed except pursuant to court order.

The DTSA also mandates that employers are required to provide notice to their employees about the new DTSA immunity rights now afforded to them.