New Federal Trade Secret Law Affects Idaho Employers, Gerald T. Husch and Andrea J. Rosholt
Employers are revising their agreements with employees as a result of the recently enacted federal Defend Trade Secrets Act, or DTSA, of 2016. Those revisions will affect agreements, such as confidentiality and non-disclosure agreements, that restrict an employee’s use or disclosure of their employer’s or another’s confidential information or trade secrets.
Employers may wish to consider revision of other documents, such as:
- separation agreements that restrict a departing employee’s use or disclosure of such information or trade secrets,
- non-competition and non-solicitation agreements that include such restrictions;
- employment policies regarding reporting violations of the law; and
- consulting agreements and other independent contractor agreements that restrict the use of confidential information or trade secrets (because DTSA defines the term “employee” to include independent contractors and consultants working for the employer).
DTSA states that employers must provide a notice in any contract or agreement with an employee governing the use of a trade secret or other confidential information. The notice is to the effect that an employee will not be held criminally or civilly liable under any federal or state trade secret law, such as the Idaho Trade Secrets Act, or ITSA, for the disclosure of a trade secret, under certain circumstances.
For example, DTSA states the employer must notify the employee that the employee will be immune from liability under a law like ITSA for the employee’s disclosure of a trade secret in confidence to the government or an attorney solely for the purpose of reporting or investigation of a suspected violation of the law. However, DTSA also states that it does not preempt any state law, and ITSA contains no “whistle blower immunity” like DTSA’s.
Similarly, DTSA states the employer must notify the employee that a trade secret may be disclosed in a filing with a court or other proceeding if the filing is made under seal. In state and federal courts in Idaho, public access to filings made under seal is generally restricted.
The notice requirement is satisfied if the contract or agreement cross-references the employer’s written policy for a suspected violation of law and that policy is given to the employee.
DTSA states that an employer cannot obtain an award of exemplary damages or attorney’s fees under DTSA in a lawsuit against an employee to whom the notice was not provided. However, employers should not ignore the possibility that courts might impose other penalties on employers who fail to give the required notice.
For many years, an employee’s wrongful use or disclosure (“misappropriation”) of an employer’s trade secret has been a felony under the federal Economic Espionage Act of 1996 (“EEA”). However, federal prosecutors seldom filed criminal actions against employees under the EEA. Similarly, the federal Computer Fraud and Abuse Act has been of limited utility to Idaho employers who wish to take action against employees who intentionally access their employers’ computerized trade secrets without or in excess of their employers’ authorization.
Effective May 16, DTSA amended the EEA to provide employers with their first federal civil remedies against employees or others who misappropriate employers’ trade secrets. Under DTSA, the remedies available to an employer for misappropriation of a trade secret in a private civil lawsuit include:
- a court order for seizure of property necessary to prevent dissemination of an employer’s trade secret;
- an injunction to prevent actual or threatened trade secret misappropriation;
- money damages; and
- exemplary damages (often called “punitive damages”) and attorney fees, if the trade secret was willfully and maliciously misappropriated.
An employer’s ability to recover an award of attorney’s fees under DTSA is especially significant in Idaho because ITSA, which is Idaho’s version of the Uniform Trade Secrets Act, or UTSA, does not include the UTSA provision to the effect that a court may award reasonable attorney’s fees to an employer in a case of willful and malicious misappropriation. Although employers may not wish to notify employees of whistle blower immunity, Idaho employers may benefit from their ability to file suit in federal court and to recover attorney’s fees under DTSA.
Gerald T. Husch is an employment law attorney with the Idaho law firm Moffatt Thomas, advising employers on issues such as terminations, non-competition and confidentiality agreements, trade secrets, employment discrimination, employee compensation, and compliance with federal, state and local laws.
Andrea Rosholt works from the Boise offices of Moffatt Thomas. Ms. Rosholt focuses her practice on litigation and business law matters, state and local as well as federal tax and ERISA issues facing companies and their executives.
Both Mr. Husch and Ms. Rosholt can be reached via telephone at 208.345.2000. More information is available at www.moffatt.com.