Tag Archives: trade secrets

Defend Trade Secrets Act – Employment Implications

By on June 2, 2016

President Obama recently signed the Defend Trade Secrets Act (“DTSA”), which provides a federal private right of action for the misappropriation of trade secrets. Previously, trade secret claims were handled only at the state level. The DTSA does not preempt state law, but instead provides another avenue for recovery. Trade secret owners may pursue federal claims including property seizure (to prevent dissemination of trade secrets), injunctive relief, and damages for actual loss and unjust enrichment. Property seizure is not lightly granted, and the DTSA provides a detailed framework for when and how property may be seized. Further, if the trade secret is willfully and maliciously misappropriated, courts may award double damages and attorney’s fees.

In the employment context, employees are immune from liability under the DTSA (and arguably state laws as well given the DTSA’s specific wording) for disclosing trade secrets that are made in confidence to a government official or attorney for the purpose of reporting or investigating a violation of law. Employees are permitted to use trade secret information in a lawsuit alleging retaliation by an employer for reporting a trade secret violation, as long as any court document containing trade secrets is filed under seal.

Although the DTSA provides a powerful cause of action for employers, the DTSA also contains some employee protections. Employers must now provide notice to employees of the immunities contained in the DTSA in agreements with employees (such as nondisclosure agreements), which may be handled by including a cross-reference to a company policy containing notice of the immunity. Failure to provide such notice prevents employers from receiving multiple damages or attorney’s fees under the DTSA. While injunctions are available under the DTSA, any injunction may prevent actual or threatened misappropriation but must not prevent the employee from entering into an employment relationship or conflict with state laws concerning the restraint of trade.

In sum, employers may now bring a civil action against employees who misappropriate trade secrets that can lead to damages and injunctive relief including seizure. However, to receive the full benefits of the DTSA, employers must update their nondisclosure and similar agreements to inform employees of the immunities available under the DTSA.  The DTSA’s effect on the technology, biotechnology and pharmaceutical industries almost certainly will be far-reaching.  As a result, the DTSA is of particular importance to businesses in greater Boston, Cambridge and other emerging technical hubs in Masshachusetts and throughout New England.  Both employers and employees should contact a Massachusetts employment attorney to update their agreements and confirm their duties.

Protecting Confidential Business Information

By on January 19, 2016

While the Massachusetts legislature continues to debate whether to ban “non-competition agreements,” support for the protection of trade secrets and confidential information remains strong. Although the Commonwealth has not adopted a version of the Uniform Trade Secrets Act, Massachusetts protects trade secrets in several overlapping ways: state law provides that the theft of a trade secret can lead to double damages for the aggrieved party; the Massachusetts Consumer Protection Act allows for the recovery of double or triple damages and attorney’s fees for misappropriating trade secrets; courts will enforce contracts requiring employees to maintain the confidentiality of secret information learned on the job; and courts will grant injunctions barring the improper use of confidential information in certain circumstances. However, just because a business states that information is confidential does not mean that a court will agree. Massachusetts uses a six-factor test to determine whether information is confidential:

(1) the extent to which the information is known outside of the business;

(2) the extent to which it is known by employees and others involved in the business;

(3) the extent of measures taken by the employer to guard the secrecy of the information;

(4) the value of the information to the employer and to his competitors;

(5) the amount of effort or money expended by the employer in developing the information; and

(6) the ease or difficulty with which the information could be properly acquired or duplicated by others.

Examples of trade secrets can include manufacturing processes, price lists, financial information, sales strategies, and product development plans. The six-factor test emphasizes that the information has to be a secret, and the business had to make a genuine effort to maintain its secrecy. The business does not ordinarily need to employ heroic measure to maintain secrecy, using armed guards and bank vaults. While appropriate efforts to maintain secrecy are a fact-based determination, businesses will often use non-disclosure agreements signed by employees, limit the internal disclosure of information to an as-needed basis, and ensure that no information is made publicly available (such as via the business’s website).

Businesses concerned about preserving information secrecy, or aware of a confidentiality breach, should contact a Massachusetts business attorney to ensure their interests are protected.