Coca-Cola, WD-40, and the Google search algorithm have more in common than meets the eye.
Each is a trade secret, closely protected by a savvy human resources department and legal counsel. The Defend Trade Secrets Act (DTSA), signed into law in May 2016, created a federal, private, civil cause of action for trade-secret misappropriation.
The term “trade secret” is defined to include all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing.” 18 U.S.C. § 1839(3).
Trade secret misappropriation is the acquisition of a trade secret through improper means, whether theft, bribery, breach, espionage, or other unlawful acts. The DTSA, however, noted that improper means “does not include reverse engineering, independent derivation, or any other lawful means of acquisition.”
Under the DTSA, employers may recover losses stemming from trade secret misappropriation, in addition to damages from unjust enrichment. Further, the DTSA also allows employers to recover attorneys’ fees and punitive damages. But, to recover attorneys’ fees and punitive damages, employers must provide advance notice to employees of whistleblower immunity. The whistleblower immunity provision protects employees who divulge a trade secret to an attorney or federal, state or local government official for the purpose of reporting illegal action.
The DTSA definition of “employee” includes independent contractors and consultants, thereby requiring that all broadly-defined employees of a company must receive a notice of immunity and anti-retaliation in any agreement governing use of confidential information. To avail themselves of all the benefits under the DTSA, employers would be wise to update their existing (or implement new) confidentiality, non-disclosure policies and procedures to reflect DTSA requirements.
A number of high-profile trade secret cases, including the recent Uber and Waymo settlement, the sentencing of two ex-Coke employees, and Best Buy’s $27 million loss, shed light on the importance of protecting trade secrets. To take full advantage of the protections of the DTSA, companies should consult with their human resources departments to ensure existing confidentiality policies and procedures are up-to-date.
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