How the Defend Trade Secrets Act of 2016 Affects Your Employment Agreements Presented By: David W. Long-Daniels, Esq. (Greenberg Traurig) Danielle Ochs, Esq. (Ogletree, Deakins, Nash, Smoak & Stewart, P.C.) Antonio D. Robinson, Esq. (Carter’s Inc.) Jonathan Pollard, Esq. (Pollard PLLC) Corie Pauling, Esq. (TIAA)

Defend Trade Secrets Act of 2016 Pre-DTSA Landscape Overview of Act’s General Provisions Remedies Immunity Provision Exemplary Damages and Attorneys’ Fees Conditioned on Notice Seizure How to Comply Defend Trade Secrets Act of 2016

Pre-DTSA Landscape

Where Does DTSA Fit In Current Landscape? Uniform Trade Secrets Act Common Law Espionage Act Computer Fraud and Abuse Act

Overview of Defend Trade Secrets Act Effective May 11, 2016 Amendment to Economic Espionage Act Access to federal courts Harmonize trade secret misappropriation law Alleviate inconsistent results under state misappropriation law Three-year statute of limitation Overview of Defend Trade Secrets Act

Broad Definition of “Trade Secret” 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 if… (A)  reasonable measures taken to keep such information secret; and (B)  the information derives independent economic value, actual or potential, from not being generally known to or ascertainable by another Broad Definition of “Trade Secret”

Broad Definition of “Misappropriation” acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by “improper means”; or disclosure or use of a trade secret of another without express or implied consent by a person acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by “improper means”; or disclosure or use of a trade secret of another without express or implied consent by a person “improper means” can include theft, misrepresentation, and “breach of a duty to maintain secrecy” (i.e., confidentiality agreements, non-disclosure agreements, etc.) Broad Definition of “Misappropriation”

Available Remedies Actual loss and unjust enrichment Exemplary Damages Attorneys’ Fees Ex Parte Seizure Available Remedies

New Civil Seizure Provision DTSA authorizes court to seize property Request can be made without notice Application must be specific Applicant must post bond for damages Court required to hold hearing following issuance of seizure order New Civil Seizure Provision

Civil Seizure Ordered in “Extraordinary Circumstances” Requires a showing that: an order pursuant to Fed. R. Civ. P. 65 or other equitable relief would be inadequate; an immediate and irreparable injury will occur if seizure is not ordered; harm to the applicant from denial of a seizure order: (1) outweighs the harm to the person against whom seizure is ordered; and (2) substantially outweighs the harm to any third parties by such seizure; the applicant is likely to succeed in showing that the person against whom the order is issued misappropriated or conspired to misappropriate a trade secret through improper means; Civil Seizure Ordered in “Extraordinary Circumstances”

Civil Seizure Ordered in “Extraordinary Circumstances” cont. the person against whom the order will be issued has possession of the trade secret and any property to be seized; the application describes with reasonable particularity the property to be seized and, to the extent reasonable under the circumstances, the property’s location; the person against whom seizure is ordered would destroy, move, hide, or otherwise make such property inaccessible to the court if put on notice; and the applicant has not publicized the requested seizure. Civil Seizure Ordered in “Extraordinary Circumstances” cont.

Seizure - Recent Decisions Dazzle Software v. Kinney, et al. (E.D. Mich. 2016) (denying ex-parte seizure) OOO Brunswick Rail Mgmt. v. Sultanov (N.D. Cal. 2017) (denying ex-parte seizure pending further proceedings) Magnesita Refractories v. Mishra (N.D. Ind. 2017) (granting ex-parte seizure of a single laptop) Seizure - Recent Decisions

Seizure – Downside Risk Wrongful or Excessive Seizure: Refers to Lanham Act provisions. Wrongful Excessive Range of Damages: Lost profits, goodwill, materials, attorneys’ fees. Punitive Damages: Available for bad faith seizure. Seizure – Downside Risk

Other Available Remedies Injunction from entering employment relationship Damages for actual loss In lieu of damages, imposition of a royalty for unauthorized disclosure or use of trade secret Exemplary damages in an amount not more than two times the amount of actual damages for “willful” and “malicious” appropriation Other Available Remedies

Immunity Provision and Notice Immunity for disclosure of trade secrets to government (safe harbor for whistleblowers) Notice of DTSA immunity provision required for exemplary damages and attorneys’ fees Notice must be in employment agreement OR in policy document Policy document must set forth employer’s whistleblower reporting policy Immunity Provision and Notice

Example of Notice Provision Notwithstanding any other provision of this Agreement: Employee will not be held criminally or civilly liable under any federal or state trade secret law for any 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 any attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. Example of Notice Provision

Example of Notice Provision cont. If Employee files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Employee may disclose the Company’s trade secrets to Employee’s attorney and use the trade secret information in the court proceeding if the Employee: files any document containing the trade secret under seal; and does not disclose the trade secret, except pursuant to court order. Example of Notice Provision cont.

Sample DTSA Notice By Policy Nothing in this policy should, or should be construed, to limit an employee’s right, if any, under Section 7 of the National Labor Relations Act and/or other applicable laws to discuss the terms and condition of his or her employment or to engage in protected concerted activity as defined by law. In addition, nothing in this policy should be construed to prohibit an employee from first (or later) reporting, or assisting in the reporting or investigation, of possible violations of any law or regulation to any federal or state governmental agency or self-regulatory organization, or making other disclosures that reasonably may be protected under whistleblower or other provisions of any applicable federal or state law or regulation. Sample DTSA Notice By Policy

Sample DTSA Notice By Policy cont. Further, as required by the Defend Trade Secrets Act, this policy does not restrict an employee’s disclosure of trade secret information belonging to the organization that is: (a) made directly or indirectly in confidence to a government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (b) made in a complaint or other document filed in a lawsuit or other proceeding if such filing is made under seal. Prior authorization by, or notice to, the organization I s not required to make any such reports or disclosure. Sample DTSA Notice By Policy cont.

Recent DTSA Cases Allstate Ins. Co. v. Rote, No. 3:16-cv-01432-HZ, 2016 U.S. Dist. LEXIS 104374, at *21 (D. Or. Aug. 7, 2016) (granting preliminary injunction under DTSA to enjoin plaintiff’s retention and use of confidential information in violation of agreement which required employee to return all confidential information upon separation). Engility Corp. v. Daniels, No. 16-cv-2473-WJM-MEH, 2016 U.S. Dist. LEXIS 166737 (D. Colo. Dec. 2, 2016) (granting preliminary injunction to prevent disclosure of confidential information under DTSA). Recent DTSA Cases

Recent DTSA Cases cont. Unum Grp. v. Loftus, No. 4:16-cv-40154, 2016 U.S. Dist. LEXIS 168713 (D. Mass. Dec. 6, 2016) (granting preliminary injunction under DTSA enjoining former employee from copying company documents in his possession and compelling employee and counsel to return all of plaintiff’s trade secret and confidential information). Recent DTSA Cases cont.

How to Comply Include notice of immunity provision in employment agreements Cross reference misappropriation policy in employment agreements Include notice of immunity provision in policy governing trade secrets and confidential information How to Comply

How to Comply cont. Revise employment agreements to take advantage of new remedies Evaluate forum-selection clauses Examine applicable state laws regarding consideration for modification of restrictive covenants How to Comply cont.

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