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Can your company keep a secret?

By April 19, 2019April 5th, 2021News, Non-Disclosure Agreements
can your company keep a secret?

When was the last time you had your company’s Non-Disclosure Agreement reviewed by legal counsel? If it’s been more than a few years, you might want to make that appointment…

A Little Background

In 2016, Congress enacted the Defend Trade Secrets Act (the “Act”). Its purpose was to give private parties a federal cause of action if their trade secrets were misappropriated. Because of the Act, companies can now file civil trade secret claims in federal district court.

How This Changed Things

Before the Act came into effect, trade secrets law (including NDAs) was a state issue. Most states had adopted the Uniform Trade Secrets Act, but each state still had its own version of trade secrets law. While the primary change is that now companies can file a trade secret misappropriation claim in federal court, there are several unique provisions in the law that pertain directly to your business. I’ll dive into the new provisions in my next blog post, but for now let’s take a look at the one that directly affects your NDA.

The Whistleblower Provision

The Act offers protections for whistleblowers. In a couple cases, a current or former employee (even an independent contractor) can get immunity from civil or criminal liability under any federal or state trade secret law. These cases include disclosing a trade secret in confidence to an attorney or government official solely to (1) report a suspected violation of the law, or (2) in a filing made in a lawsuit under seal.

The Act also permits an employee to use trade secret information in an anti-retaliation lawsuit. If the employee files a lawsuit for retaliation by an employer for reporting a suspected violation of the law, the employee can disclose the trade secret to their attorney. They can also share the trade secret during the legal proceeding, as long as it is filed under seal.

How Does This Affect Your NDA?

Your Non-Disclosure Agreement may be unenforceable, especially if it was drafted before the Act became law on May 11, 2016. Make sure your NDA—with both employees and independent contractors—mentions the Act’s whistleblower immunity clauses. You won’t be able to recover damages in a trade secret lawsuit otherwise.

The Act requires employers to provide employees with notice of the Act’s immunity clauses “in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” You can comply by simply updating your Non-Disclosure Agreement and employee or independent contractor agreements to include this notice.

Time for an update?

Contact me to review and update your Non-Disclosure Agreement.

Written by Mark Jordan



Photo by Kristina Flour on Unsplash