GREGG PALEY DISCUSSES BIG CHANGES FOR NON-DISCLOSURE AGREEMENTS: DEFEND TRADE SECRETS ACT OF 2016 

Most savvy companies utilize a wide variety of protective measures to guard against the use or disclosure of confidential information by employees and contractors. One of the most effective strategies is to require anyone affiliated with the company to execute a Non-Disclosure Agreement that identifies the precise nature of the protected information, the duration of the restriction and employer remedies in the event of default.

However, a recent change under federal law due to the Defend Trade Secrets Act of 2016 (DTSA) has added additional requirements for Non-Disclosure Agreements entered following its enactment with potentially serious consequences for the failure to comply. The good news is that the DTSA itself is a welcome alternative to the myriad of different state laws involving theft of trade secrets and is the most significant trade secret reform in decades. In addition, the Act does not preempt state law trade secret protections and remedies which remain in effect as well providing several alternatives if a lawsuit is required.

The DTSA doesn’t apply to agreements in place prior to the Act but all new, updated or revised agreements must include the following whistleblower disclosure language:

"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…is made… (1) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney and solely for the purpose of reporting or investigating a suspected violation of law; or (2) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. 18 U.S.C. §1833 (b) (1)."

There is also a second method of complying with the disclosure requirement by providing employees and contractors with a cross-reference to the company’s formal written policy for reporting suspected violations without retribution.

Fortunately for employers, noncompliance with the new requirement does not mean that your confidential information is no longer protected. What does happen however is that companies lose the right to seek punitive damages for egregious violations and waive entitlement to the payment of attorney’s fees and costs by the breaching party. Although not fatal to a successful lawsuit, losing the threat of punitive damages and attorney’s fees may prolong litigation that would otherwise be settled much earlier because of those potential damages.

Protecting your confidential and proprietary information is one of the many important steps your company can take to protect market share and ensure the continued growth and longevity of the business. Gregg Paley at Colson & Paley, LLC can help evaluate the strength of your current system and advise you on the best methods to protect corporate information from theft. We can also prepare or review employee handbooks and policies as well as drafting Non-Compete Agreements to prevent employees from wrongfully competing against you by using your information to help competitors.

Gregg Paley, Esq. http://www.colsonandpaley.com/gregg-paley-attorney-lighthouse-point-florida/