Today, President Obama signed into law the Defend Trade Secrets Act. This means that companies whose trade secrets are misappropriated can now sue in federal court. This will likely usher in a new paradigm in the world of trade-secrets litigation. It will be very interesting to see how plaintiffs react and the statute develops in the next few years. In the meantime, take a look at my previous post for an urgent recommendation for all companies now that the DTSA has become effective.
The Defend Trade Secrets Act (DTSA), which creates a federal cause of action for trade-secrets misappropriation, will be signed into law by President Obama in the coming days. This new law will have a substantial effect on where, and how, trade-secrets cases are litigated. Now is the time to figure out if your company is ready for the new law.
Since the DTSA’s definitions of trade secrets and misappropriation are largely similar to those in the Uniform Trade Secrets Act adopted by most states, I’m most concerned about making sure companies are minimizing the risk that they will unexpectedly be hit with a seizure order.
As has been widely discussed and debated, the DTSA contains an ex-parte seizure provision that authorizes judges to order the seizure of property containing the plaintiff’s trade secrets. While there are substantial protections to prevent abuse of this remedy, companies need to make sure they are not at risk of having their property seized.
This brings us to the critical step that all companies need to take now: Look carefully at your employee hiring/onboarding process. Far too many new employees bring proprietary documents from their prior employer; sometimes maliciously, sometimes innocently. Once the DTSA becomes law, if a new employee saves these types of documents on your server, you will be at risk of having law enforcement seize whatever is storing the documents.
Use this opportunity to conduct a comprehensive audit of your onboarding process. Make sure that your restrictive covenants and NDAs require new employees to represent that they are not bringing any proprietary information from a prior employer. Train the employees who conduct the onboarding process to discuss this issue with new employees before they are given access to your server. New employees must understand that they are prohibited from saving any documents from a prior employer on any company property, including servers, employee-issued devices, and media. Finally, work with IT to see if it makes sense to install protections that can alert to any external documents saved on your system by a new employee.
As always, each company needs customized solutions to best address the unique issues affecting your company and industry. Consult with an attorney specializing in trade-secret law who can advise what steps your company should take.