Recently enacted federal civil trade secret legislation immediately impacts the way non-disclosure agreements should be drafted. The owner of confidential information may find himself without important remedies under the new statute if he has failed to include in his employee agreements notice of the statute’s whistleblower immunity provisions. The statute provides for notice requirements in all agreements imposing a confidentiality obligation on employees, independent contractors and consultants or else certain remedies will be limited.

A.        What Activities Receive “Immunity”

Recent amendments to the Economic Espionage Act, 18 U.S.C.A. Sec. 1831 et seq. (EEA) contain new and additional whistleblower protections. The amended EEA now provides that the following types of disclosures will enjoy at least some measure of immunity:

• Disclosure of a trade secret to a governmental official or an attorney solely for the purpose of reporting or investigating a suspected legal violation (referred to hereafter as “Whistleblower Disclosures”)^[1];
• Disclosure of a trade secret in a document that is filed under seal in a lawsuit or other proceeding (referred to hereafter as “Under Seal Disclosures”)^[2];
• Disclosure or use of a trade secret in connection with retaliation lawsuits, so long as filings containing the secret are made under seal.^[3]

B.        What Activities Do Not Receive “Immunity”

1.         Publication of Trade Secrets

Under the plain meaning of the statute’s immunity language, certain activities receive no protection. Disclosures to the media and the public, for example, are not covered. The only disclosures afforded immunity are to legal counsel, governmental authorities, and adjudicative tribunals. And the statute is clear that such disclosures to the authorities must be made “in confidence” and disclosures in lawsuits and other proceedings must be made “under seal.” Any whistleblower publicly disclosing confidential materials (e.g., by posting information on social media or by talking to the press) therefore will find no shelter under the EEA.

2.         Improper Acquisition of a Trade Secret

Nor do the EEA’s new immunity provisions extend to the unauthorized or otherwise improper acquisition of a trade secret. Indeed, the statute expressly states that it does not “authorize, or limit liability for, an act that is otherwise prohibited by law, such as the unlawful access of material by unauthorized means.”^[4]

C.        The Limits of “Immunity”

1.         Trade Secrets Only

Even when the statute’s immunity provisions apply, their protection is limited. For example, as its title makes clear, Section 1833(b) immunity extends only to “liability for confidential disclosure of a trade secret . . . .” Unflattering, non-public information without competitive value might be very appropriate for whistleblower disclosure, but it might not constitute “trade secret” information covered by the EEA. It is not clear at this point whether and to what extent the EEA’s immunity provisions will extend to a whistleblower’s disclosure of information that, for whatever reason, does not constitute a trade secret.

2.         Trade Secret Misappropriation Claims Only

The immunity provided in subsection (b)(1) (for Whistleblower Disclosures and Under Seal Disclosures) is expressly limited to liability “under any Federal or State trade secret law.”^[5] This limitation is important because, as stated above, claims brought against whistleblowers frequently sound in contract (e.g., breach of a confidentiality agreement) or are brought under common law principles that do not require a trade secret (e.g., breach of fiduciary duty). Such claims apparently will not receive immunity under EEA.

D.        Impact on Employers --The Need to Update All Non-Disclosure Agreements

Employers across the country will be revisiting their non-disclosure agreements. The EEA now requires that agreements with an employee regarding confidentiality must contain a notice regarding the newly added immunity provisions. Specifically, Section 1833(b)(3) states that “[a]n employer shall provide notice of the immunity set forth in this subsection in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.”^[6] This broad wording extends to any and all agreements with an employee that address confidentiality— or otherwise govern the use of confidential information—and therefore might include employment agreements, confidentiality and non-disclosure agreements and benefits agreements. The notice provision is quite broad in another respect as well. It applies to contracts not only with employees, but with contractors and consultants as well.^[7]

Notice can be provided by reciting the immunity provisions, or by referencing a “policy document provided to the employee that sets forth the employer’s reporting policy for a suspected violation of law.”^[8] Presumably, this would allow an employer to insert into its employment and confidentiality agreements a reference to the page in its employee handbook wherein its reporting policy can be found – so long as that policy is provided to employees when they sign the agreement. The prudent employer will ensure that its reporting policy contains provisions mirroring those in the statute and will address in some other way any consultants and/or independent contractors who might undertake contractual confidentiality obligations without receiving a copy of the handbook.

The ramifications for failing to provide this notice are limited to a restriction of the array of remedies available to the employer under the statute. Employers are ineligible to receive an award of exemplary damages or attorneys’ fees under the EEA against any employee to whom notice was not provided.^[9] While such remedies still might be available to such an employer under the Uniform Trade Secrets Act or equivalent state statute, depending on the circumstances, prudent employers will consider adding the required notice provision to their NDAs.

_{[1] 18 U.S.C.A. § 1833(b)(1)(A) (2016).}

_{[2] 18 U.S.C.A. § 1833(b)(1)(B) (2016).}

_{[3] 18 U.S.C.A. § 1833(b)(2) (2016).}

_{[4] 18 U.S.C.A. §1833(b)(5) (2016).}

_{[5] 18 U.S.C.A. §1833(b)(1). Immunity for anti-retaliation suit use & disclosures under subsection (b)(2) does not contain the same limitation.} 

_{[6] 18 U.S.C.A. §1833(b)(3)(A) (2016).}

_{[7] 18 U.S.C.A. § 1833(b)(4) (2016) (defining “employee” to include “any individual performing work as a contactor or consultant for an employer”).}

_{[8] 18 U.S.C.A. §1833(b)(3)(B).}

_{[9] 18 U.S.C.A. §1833(b)(3)(C) (2016).}