The Defend Trade Secrets Act (DTSA) is a newly enacted law that creates a federal cause of action for companies trying to protect their trade secrets. This is a landmark change in creating uniform civil protections for companies in every state. Nearly all businesses have some kind of trade secrets and many will need to act in order to ensure they continue to protect their causes of action under the DTSA. Here are the three things that every business needs to know about the new DTSA:
1. Creates a Broad Definition of Trade Secret
The DTSA adopts language from the EEA in order to define what is a trade secret. Now under the DTSA, any information, whether tangible or intangible, may qualify as a trade secret if:
- the information is secret
- the owner took reasonable efforts to maintain its secrecy; and
- the secret has some independent economic value
A few examples of company information that may qualify for protection include:
- customer lists;
- recipe for cookies;
- digital marketing process consistently resulting in capturing followers.
The DTSA does not preempt state law. Thus, many companies have a choice whether to proceed in enforcing their rights under this act in either federal or state court.
2. Provides a Powerful New Tool
The DTSA provides the right for companies affect by a loss to seize the taken trade secret without notice. Companies seeking to do this need to ask court permission, but they do not have to give notice to the entity holding the stolen trade secret. To be successful, the company would need to show that the less severe options (i.e. an injunction to stop usage) is insufficient to protect the trade secret. Examples when a company may opt to use this remedy include things like:
- An employee that left with trade secrets (i.e. customer lists, formulas, etc)
- Competitor that received information from an unintended attachment to an email
- Vendor fixing the device that contained critical data
3. Establishes a Duty to Provide Notice to Protect Claims
Companies now have the obligation to provide notice to its employees of the “whistleblower immunity” if they want to take advantage of the DTSA. Failure to insert these clauses could affect the amount of any potential recovery when enforcing your trade secrets. This is a gamble that many companies cannot afford. Thus, companies should consider the following actions:
- Marking all documents (or data) containing sensitive information as “confidential,” “trade secret,” or “Proprietary”
- Reviewing existing employment agreements and policies to determine whether appropriate warnings are included
- If none, then develop a “whistleblower” policy and provide written notices to all existing and future employees. Obtain signatures from everyone and retain them with all other employment documents.
- Seem like a lot of work? It can be, but the consequences can be devastating to many businesses if the action is not taken to protect the most valuable assets. The attorneys at Loop Legal would be happy to assess the ability of your business to take advantage of this new remedy. We can also help with preparing the newly required notices to your employees. Send an email to [email protected] for more information or to schedule a free consultation.
Seem like a lot of work? It can be, but the consequences can be devastating to many businesses if the action is not taken to protect the most valuable assets. The attorneys at Loop Legal would be happy to assess the ability of your business to take advantage of this new remedy. We can also help with preparing the newly required notices to your employees. Send an email to for more information or to schedule a free consultation.