By Fredrick P. Niemann, Esq. of Hanlon Niemann & Wright, a Freehold, NJ Business & Corporate Law Attorney

In May of 2016, a new law went into effect known as the Defend Trade Secrets Act (DTSA).  This law allows companies to file lawsuits related to the theft of trade secrets under a federal law called the “Economic Espionage Act.”  What is so special about this new law is that before it was signed into law, only federal prosecutors were allowed to bring strictly criminal actions when the circumstances were outrageous enough to warrant this type of criminal prosecutor. Previously a corporation’s rights were primarily controlled by the laws of early state.

New Jersey (among many other states), had previously adopted a form of the Uniform Trade Secrets Act.

This new law allows the state to bring in the federal district courts.  This is helpful because when legal action is taken employees often travel from state to state and tend to take their employers’ trade secrets with them!  This is a tool that will help business’ enforce their rights and recover provable economic damages.

Under the old law an argument being made was called the “inevitable disclosure.”  It sounds self-explanatory, but courts in some states have applied this theory in the following way: they grant injunctions which prevent employees from working for a new employer.  Their reasoning is that the employee will inevitably be required to disclose the trade secrets when he or she begins working for the new employer.  The new federal law expressly denies/rejects this theory and requires solid evidence of the misappropriation of the previous employers’ trade secrets.  Not only is injunctive relief (stopping someone from doing something that can hurt you or your business) a possible avenue an employer will be able to recover double damages if the trade secret is “willfully or maliciously misappropriated.”  This exists to effectively deter offenders from disclosing and using trade secrets in a surreptitious fashion.

Ultimately, lawsuits will be the last resort because they can often be very time-consuming, expensive, and the results unpredictable.  With that being said businesses should take steps to protect their confidential information.  Businesses should restrict access to important, confidential information.  They should also require employees to sign confidentiality agreements, among many other possibly effective practices.

To discuss your NJ Business & Non Competition matter, please contact Fredrick P. Niemann, Esq. toll-free at (855) 376-5291 or email him at fniemann@hnlawfirm.com.  Please ask us about our video conferencing consultations if you are unable to come to our office.