Maschoff Brennan



The Defend Trade Secrets Act – Getting a Head Start

April 28, 2016

On April 27, 2016, the United States House of Representatives approved the Defend Trade Secrets Act of 2016 (DTSA) by a vote of 410-2. The bill now awaits President Obama’s approval, which is expected in the next few days. The DTSA, which for the first time provides a federal civil remedy for the misappropriation of trade secrets, will go into effect on the day of its enactment.

A central provision of the DTSA permits a trade secret owner to bring a civil action for misappropriation of a trade secret if the trade secret is related to a product or a service that is used in, or intended for use in, interstate or foreign commerce. A procedural benefit is that it provides for a “civil seizure” order by a court that is analogous to a temporary restraining order. Further, if a misappropriation is found, a court can grant injunctive relief. In addition, the act provides for compensatory damages. Enhanced damages are available if the misappropriation is shown to be willful. Further, the DTSA provides a remedy against former employees where there is “evidence of a threatened misappropriation.”

Another provision of the DTSA requires immediate attention for employers. Specifically, the act imposes an affirmative requirement on employers to notify its employees of a whistleblower immunity provision provided in the new law. This notice is required to be provided in “any contract or agreement with an employee that governs the use of a trade secret or other confidential information.”

The text of the immunity provision states:

An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that—

  • (A) is made—
    • (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and
    • (ii) solely for the purpose of reporting or investigating a suspected violation of law; or
  • (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

If the employer fails to comply with the notice requirement, then the employer may not be awarded exemplary damages or attorney’s fees in an action against an employee for trade secret misappropriation under the DTSA.

The employer shall be considered in compliance with the notice requirement “if the employer provides a cross-reference to a policy document provided to the employee that sets forth the employer’s reporting policy for a suspected violation of law.”

Employers should immediately begin to consider whether any employment agreements should include a notice provision regarding whistleblower immunity, especially if such contracts govern the use of trade secrets or confidential information.


Mikhael Mikhalev