Third Time's the Charm Part III: The Federal Defend Trade Secrets Act's Whistleblower Protection

Posted By Godwin Bowman & Martinez || May 4, 2016

Update: We are pleased to report that both the House and the Senate have passed the FDTSA and it is on its way to President Obama for his promised signature of the Senate version of the bill. Now, back to whistleblowers….

Over the past two weeks, we have discussed what the Federal Defend Trade Secrets Act ("FDTSA") is, and how it differs from the Texas Uniform Trade Secrets Act. This week, we look at what protections are built into FDTSA for whistleblowers.

Whistleblowing has been a hot topic in the private and public sector over the past few years, which is why the FDTSA bill includes language that protects those trying to do the right thing.

Specifically, the FDTSA provides immunity from liability for confidential disclosure of trade secrets to the government for the purpose of reporting or investigating a suspected violation of the law. Additionally, the FDTSA provides employees with immunity from liability for disclosure of trade secrets in court documents filed under seal, including an anti-retaliation proceeding. It is very important to note that the FDTSA's definition of "employee" is very broad; and theoretically includes those that would otherwise be independent contractors as well as non-employee consultants.

Employers should be aware that once the FDTSA becomes the law, they will have to provide "adequate and specific notice" of its whistleblower protections to employees in employment contracts and/or company policy documents. Any employer who fails to provide such notice will forfeit recovery of exemplary damages or attorneys' fees if there is a subsequent lawsuit brought by the employer under the FDTSA.

Given the broad definition of "employee" under the FDTSA, businesses should prepare for the bill's passage by standardizing all contracts and agreements – including confidentiality, employment, independent contractor, and consulting agreements – to incorporate the notice language required under the FDTSA.

If your business needs help reviewing and standardizing your documents in anticipation of the FDTSA, please contact us to assist with that process. Until then, stay tuned for next week's installment of "Third Time's the Charm", where we will analyze the benefits of the FDTSA for Texas employers.

Leiza DolghihMichael A. HolmesLeiza Dolghih is a Senior Attorney in Godwin Bowman & Martinez's Unfair Competition, Trade Secrets and Copyright Section. She has over a decade of experience in commercial litigation and has handled multiple temporary restraining order and temporary injunction hearings in trade secrets lawsuits. LDolghih@GodwinLaw.com.

Michael A. Holmes is an Associate in Godwin Bowman & Martinez's Commercial Litigation section. He has a broad range of experience in Business, Employment, Securities, Financial Institutions, Energy, and Environmental disputes in state and federal court. MHolmes@GodwinLaw.com.

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