The Defend Trade Secrets Act: 3 Tips for Every Employer to Follow

Posted by Neal F. Weinrich on

Yesterday, President Obama signed into effect a major development in trade secrets law for American companies – the Defend Trade Secrets Act (DTSA). If you are an employer or business owner, this new law cannot be ignored. Described as the “most significant expansion” of federal IP law in 70 years, this law benefits all businesses. It will help companies of all sizes protect their innovations and intellectual property as trade secrets under a uniform federal system (Click here to watch, “What is a Trade Secret?”).

A federal trade secrets law has been in the works for many years. We live in a digital era and a federal law to address trade secret theft was long overdue. Today, it is easier than ever for employees to misappropriate company data and more challenging than ever for companies to prevent trade secret theft. At Berman Fink Van Horn, we often advise clients who discover that a rogue former employee e-mailed sensitive documents to his or her personal e-mail address after resigning. And we advise clients who discover that an employee popped in a flash drive and downloaded a customer list on his/her way out the door. Unfortunately, stories like these are all too frequent, making trade secret theft a serious concern for companies of all sizes.

So, what does the passage of the DTSA mean for your business? It is another tool – and perhaps the best one to date – that companies can use against employees who misappropriate information. However, employers must do their part. Below are three tips that can allow every employer to protect their business using the DTSA:

#1 Identify the information that is most critical to your business. Then, identify the steps you are taking to protect that information. Is access to the information limited to a need-to-know basis? Is the information stamped confidential? Is the information located on a secured server that is protected by a firewall? Can it only be accessed using a complex password that must be changed every 90 days? A company can only protect its trade secret information using the DTSA if it can show that it took reasonable efforts to protect its trade secrets.

#2 Have employees agree in writing not to use or disclose your confidential information or trade secrets.  Make sure your agreements take all of the relevant laws into account, including the new DTSA.

#3 Create a “trade secret” culture. Make sure both management and rank-and-file employees are trained on how to protect the company’s trade secrets. As part of the on-boarding process, explain to new hires that they cannot bring or use information from prior companies. As part of the exit process, explicitly ask the employee during the exit interview if he or she has returned all company devices, property and information, including any information which might reside on the employee’s personal computers or e-mail accounts.

The DTSA is a timely and positive response to the growing problem of trade secret theft. Make sure that your company is positioned to take advantage of this new law.

As always, let us know if we can help or if you have any questions.