Federal Trade Secrets Law Grants Immunity to Employees Who Act as Whistleblowers

The balance of power between an employee and an employer is usually very uneven in favor of the employer. At times, laws intended to help businesses can inadvertently harm employees. The Defend Trade Secrets Act (DTSA) of 2016 gives businesses important tools for protecting their proprietary information, but it could also give employers an additional advantage over their workers. Congress therefore added provisions to the DTSA granting immunity to whistleblowers and others reporting suspected legal violations. A court recently ruled on an employee’s immunity claim, possibly for the first time since the law’s passage.

The DTSA amends federal criminal laws dealing with the theft of trade secrets, 18 U.S.C. § 1831 et seq., to allow the owners of trade secrets to file civil lawsuits for the misappropriation of trade secrets. The law defines “trade secret” broadly to include both tangible and intangible information that the owner “has taken reasonable measures to keep…secret” and that “derives independent economic value” from being kept secret. Id. at § 1839(3). The intentional theft of a trade secret may be prosecuted as a felony. The owner of a trade secret can sue in federal court for injunctive relief and other damages, including “the seizure of property necessary to prevent the propagation or dissemination of the trade secret.” Id. at § 1836(b)(2)(A)(i).

The unauthorized disclosure of a trade secret is not always based on criminal or otherwise wrongful intent. Sometimes, disclosure might be necessary to prevent even greater legal violations. People who have access to trade secrets and disclose them to government officials or others, with the intent of reporting suspected unlawful activity, are commonly known as “whistleblowers.”

While the act of “whistleblowing” often requires breaking the law, some legal protections are available. An individual who confidentially discloses trade secrets to a government official or an attorney, “solely for the purpose of reporting or investigating a suspected violation of law,” is immune from civil and criminal liability under the DTSA. Id. at § 1833(b)(1)(A). This also applies to trade secrets disclosed to an attorney or submitted in a sealed court filing in an anti-retaliation lawsuit. Id. at § 1833(b)(2).

The DTSA’s immunity provisions protect employees from civil claims, either in a new lawsuit or in a counterclaim, alleging the theft of trade secrets. The statute does not, however, specify how an employee or other individual can assert immunity. No New Jersey court has addressed this question, but another federal court considered it in late 2016.

Immunity under the DTSA is an affirmative defense, meaning that a defendant must establish it by a preponderance of the evidence. Unum Group v. Loftus, No. 4:16-cv-40154, mem. order (D. Mass., Dec. 6, 2016). The plaintiff in Unum sued a former employee under the DTSA for allegedly taking confidential materials without authorization. The defendant filed a motion to dismiss, asserting the DTSA’s immunity provisions and alleging that he turned the confidential materials directly over to his attorney as part of an investigation of wrongdoing by the company.

The court held that a motion to dismiss, in which a defendant introduces no evidence, is not the correct method of asserting immunity. It did not rule on what the defendant should do, but a summary judgment motion seems like a better tactic, short of raising the defense at trial.

The Resnick Law Group’s team of skilled and experienced whistleblower attorneys can assist you with your employment matter in New Jersey or New York. To schedule a confidential consultation, contact us today online, at 973-781-1204, or at (646) 867-7997.

More Blog Posts:

New Jersey Jury Awards $8.45 Million in Wrongful Termination Case, The New Jersey Employment Law Firm Blog, December 2, 2016

How New Federal Trade Secrets Legislation Could Affect New Jersey Employment Law, The New Jersey Employment Law Firm Blog, May 27, 2016

Non-Competition Agreements Under New Jersey Law, The New Jersey Employment Law Firm Blog, November 20, 2015

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