Whistleblowers and Trade Secrets: Does the DTSA Protect Confidential Data?

Employers often go to great lengths to protect company documents and communications concerning and discussing confidential trade secret information. But what happens when employees leave, bring a whistleblower claim, and the employer learns they have sent themselves numerous confidential communications containing trade secret information? What about when an employee later attempts to introduce those documents as evidence in a subsequent whistleblower lawsuit? Unfortunately, employers often have limited options in this situation given various federal and state whistleblower protections in place.

While the federal Defend Trade Secrets Act (DTSA) amended the Economic Espionage Act (EEA) to provide a federal civil remedy against trade secret misappropriators, there is a carve-out providing limited immunity for purported whistleblowers. The DTSA states:

(1) An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that: (A) is made— (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

Employers facing this issue may need to strategize regarding the whistleblower claim while, at the same time, attempting to protect confidential information. In these cases, some employers will attempt to get a protective order in place from the start of the dispute. To the extent the purported whistleblower seeks to produce confidential documents containing trade secrets information, the employer can ask that the production is made under a “confidential” designation under the protective order. If litigating in state court, the protective order can also ensure any otherwise public filings containing the confidential documents are also made under seal.

Despite the above protection from the DTSA, employers could still consider bringing claims for various civil violations against an employee. Examples include breach of contract for violating a confidentiality agreement, conversion, tortious interference, or breach of fiduciary duty. The problem in proving these claims generally is that the employer must show both harm and damages.

Employers may also want to be aware of a developing trend in which courts may choose to excuse an employee’s violation of a confidentiality agreement where the employee brings a whistleblower claim relating to the information taken from the company. Courts will typically look at what information was taken, want to know how and why it was taken, and to whom it was given. Another consideration to keep in mind is that, with a pending whistleblower claim, a trier of fact may not be sympathetic to the employer’s attempts to go after the employee.

Ogletree Deakins will continue to monitor developments and will publish updates on the Ethics / Whistleblower and Unfair Competition and Trade Secrets blogs as additional information becomes available.

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