Winston & Strawn’s Labor & Employment Practice hosted an eLunch titled “Defend Trade Secrets Act: Obligations and Opportunities” on May 31, 2016. In today’s highly mobile and competitive marketplace, employers all too often face actual or threatened theft of company trade secrets and other confidential information. To address this growing business concern, President Barack Obama signed into law the bi-partisan Defend Trade Secrets Act (DTSA) on May 11, 2016. The DTSA federalizes trade secrets law, thereby providing employers a clear path to enforce their trade secret rights in federal court. During this eLunch, Winston & Strawn Partners Dan Fazio and Cardelle Spangler provided an important overview of what employers need to know about the DTSA, including: • Overview of DTSA • Comparison of the DTSA to the Uniform Trade Secrets Act • Provisions unique to the DTSA • DTSA’s whistleblower immunity provision • DTSA’s notice requirements • Tips and best practices for employers to protect trade secrets

1. Defend Trade Secrets Act:
What You Need to Know
May 31, 2016

2. Today’s eLunch Presenters
Cardelle B. Spangler
Partner, Labor & Employment
Chicago
CSpangler@winston.com
Daniel J. Fazio
Partner, Labor & Employment
Chicago
DFazio@winston.com

3. Agenda for Today’s Presentation
• Overview
• Key Provisions
• Comparison to Uniform Trade Secrets Act
• Important Takeaways
• Tips and Best Practices for Employers
3

4. DTSA Overview

5. History of DTSA
• In the past 3 years, Congress attempted on 4 occasions to
pass legislation protecting trade secrets
• Congressional support for DTSA was nearly universal
• President Obama signed bill into law on May 11, 2016
• Amends Economic Espionage Act of 1996
5

6. Purpose of DTSA
• Help combat the continued and growing threat of trade
secret misappropriation
• Help businesses safeguard their trade secrets in federal
court
• Address perceived shortfalls in protections offered by the
States under the Uniform Trade Secrets Act
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7. DTSA Key Provisions

8. Key Provisions of DTSA
• Creates Federal civil remedy for trade secret theft
• Purports to enhance uniformity and predictability
• Creates civil seizure procedure
• Provides injunctive and monetary remedies
• Provides whistleblower protections
• Provides incentive to notify employees of certain
whistleblower rights
• Does not preempt state laws
• Provisions are effective immediately
8

9. Federal Civil Remedy
• DTSA provides:
• “An owner of a trade secret that is misappropriated may bring a civil action …
if the trade secret is related to a product or service used in, or intended for use
in, interstate or foreign commerce.”
• “Trade Secret” includes:
• “All forms and types of financial, business, scientific, technical, economic, or
engineering information…whether tangible or intangible, and whether or how
stored, compiled, or memorialized physically, electronically, graphically,
photographically, or in writing if:
a) The owner thereof has taken reasonable steps to keep such information
secret; and
b) The information derives independent economic value, actual or potential,
from not being generally known to, and not being readily ascertainable
through proper means by, another person who can obtain economic value
from the disclosure or use of the information.”
9

10. Federal Civil Remedy cont.
• Misappropriation includes:
• 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 consent, by a person
who: (1) used improper means to acquire knowledge of the trade secret; (2)
had reason to know that the knowledge of the trade secret was acquired by
improper means, or under circumstances giving rise to a duty of secrecy; or
(3) before a material change in position, had reason to know that the trade
secret was disclosed by accident or mistake.
• Improper Means include:
• Theft, bribery, misrepresentation, breach or inducement of breach of a duty of
secrecy, or espionage through electronic or other means. Improper means do
not include reverse engineering, independent derivation, or any lawful means
of acquiring a trade secret.
10

11. Civil Seizure Procedure
• Civil seizure available in extraordinary circumstances
• Requirements for ordering a civil seizure:
• Preliminary injunction or temporary restraining order not adequate
• Immediate and irreparable injury will occur if seizure not granted
• Harm to applicant outweighs harm to person against whom seizure would be
ordered and substantially outweighs harm to third parties
• Applicant likely to show the existence of trade secret and its misappropriation or a
conspiracy to misappropriate it
• Person against whom seizure would be ordered has actual possession
• Application describes matter to be seized and, to a reasonable extent, its location
with particularity
• Person against whom seizure would be ordered, or persons acting in concert with
them, would destroy, move, hide, or make unavailable the matter if on notice
• Applicant has not publicized requested seizure
11

12. Civil Seizure Procedure cont.
• Elements of a civil seizure order
• Provide for the narrowest seizure of property necessary to achieve
purpose
• Be accompanied by an order protecting the seized property from
disclosure
• Delineate for law enforcement officials executing the seizure the scope
of their authority
• Set a hearing date within seven days
• Require security
• Party against whom an order has issued may move at any
time for dissolution or modification of the order
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13. Civil Seizure Procedure cont.
• Protection from publicity
• Secure storage of seized material
• Service of order
• Seizure hearing
• Party obtaining order must prove facts
• Opposing party may seek modification or dissolution
• Court may modify time limits for discovery
• Action for damages caused by wrongful seizure
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14. Injunctive and Monetary Remedies
• Injunctive relief
• Limitations on preventing a person from entering an employment
relationship
• Cannot conflict with applicable State law prohibiting restraints on
practicing a lawful profession, trade, or business
• Damages
• Exemplary damages for willful and malicious misappropriation
• Attorney’s fees for:
• Bad faith claims
• Willful and malicious misappropriation
• Three year statute of limitations
14

15. Whistleblower Protections
• Immunity under Federal, State, and local laws for disclosure
of trade secrets if either:
• Made in confidence:
• To a Federal, State, or local official, or to an attorney; and
• For the purpose of reporting or investigating a suspected violation of law; or
• Made in a complaint or other document filed in a lawsuit or other
proceeding, if filed under seal
• Immunity for disclosure in an anti-retaliation lawsuit
15

16. Notice Provision
• In order to take advantage of potential exemplary damages
and attorneys’ fees, employers must:
• Notify employees of whistleblower immunity in trade secrets or
confidentiality agreements
• “Employee” is defined broadly
• An employer may provide notice by cross-reference to a policy document
• But remember: These remedies may be available under state laws
• Applies to contracts entered into or amended after May 11,
2016
16

17. DTSA v. UTSA: A Comparison

18. DTSA/UTSA Comparison of Key Provisions
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Key Statutory Provisions DTSA UTSA
Definition of “Trade Secret” See Slide 9
Similar except: covers all “information”, rather
than the six specific types enumerated in
DTSA and does not require that “owner” be
the one to keep information secret
Definition of “Misappropriation” See Slide 10 Substantively the same
Definition of “Improper Means” See Slide 10 Substantively the same
Exclusions to “Improper Means”
Reverse engineering, independent derivation, or any
other lawful means of acquisition
Discovery by independent invention; discovery
by reverse engineering; discovery under a
license from the owner of the trade secret;
observation of the item in public use or on
public display; obtaining the trade secret from
published literature
Civil Seizure Provision See Slides 11 - 13
N/A
Note: Some states permit ex parte writ of
replevin through which plaintiff may obtain
possession of property prior to final judgment
Injunctive Relief
Limitations on restricting employment
Inevitable disclosure theory not available
Restrictions on employment may be available
Inevitable disclosure theory may be available
Exemplary Damages and Attorneys’ Fees Available if provide notice of whistleblower rights Available without notice provision
Whistleblower Provision See Slide 15
N/A
Note: Some states, nevertheless, have broad
whistleblower protections provided in other
statutes
Statute of Limitations
3 years 3 years

19. Key Takeaways

20. 3 Key Takeaways
• Federal Court option
• Extraordinary circumstances needed for civil seizure
• State law claims likely added to DTSA claim initially
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21. Tips and Best Practices for Employers

22. Tips and Best Practices
• Evaluate whether existing agreements require amendment
• Consider including notice provision in contracts going
forward
• May be done by cross-reference to a policy document
• Consider auditing existing trade secret protections
• Consider developing response plan for threatened and
actual misappropriation of trade secrets
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23. Questions?

24. Thank You
Cardelle B. Spangler
Partner, Labor & Employment
Chicago
CSpangler@winston.com
Daniel J. Fazio
Partner, Labor & Employment
Chicago
DFazio@winston.com