What the Federal Defend Trade Secrets Act of 2016 Means For South Carolina Employees

Confidential informationAlthough there was very little notice by the press or voters, trade secrets lawyers saw a significant development in the law recently.  Last month, President Obama signed into law the Defend Trade Secrets Act of 2016 (DTSA). The DTSA provides a federal counterpart to the various state laws that already govern trade secret litigation.

Currently in South Carolina, employees can be sued under the South Carolina Trade Secrets Act for misappropriation of trade secrets. The law defines “trade secrets” as “information including, but not limited to, a formula, pattern, compilation, program, device, method, technique, product, system, or process, design, prototype, procedure, or code” that is valuable because it is not readily known (i.e., secret) and the owner of the trade secret has taken reasonable efforts to maintain its secrecy. As attorneys who have litigated trade secrets claims in court, we’re well aware that the law incentivizes litigation and can provide businesses with victories before the matter is even litigated or before any discovery can take place.

Very often a trade secrets claim is brought by a business against a former employee who has gone to work for a competitor. Trade secrets lawsuits can be accompanied by other claims, such as breach of contract (if the employee signed a non-disclosure agreement). The reality is that these types of lawsuits can brought even if the business has no direct proof of such trade secret information being used, so long as the business has a good faith belief that the secrets were taken and are being used (and frankly, sometimes there’s not even a good faith basis for making the claim).  Many times the claim that the information meets the legal definition of “trade secret” is sketchy.

With the new federal trade secrets law, businesses can have their lawyers sue former employees and their new employers in federal court directly. The DTSA also allows businesses to seek to have law enforcement officials seize property—without advance notice to the accused—to prevent dissemination of the trade secrets at issue, if the trade secret owner can establish that an ordinary injunction (or court order) would not provide sufficient protection.

Further, while South Carolina law only provides for double damages for willful and malicious misappropriation, the DTSA will allow courts to award triple damages. However, if the claim is brought in bad faith, the law does provide a cause of action for the employee to bring a claim against the former employer, which, if successful, entitles the employee to recover attorneys’ fees and costs.  However, the employee will be required to carry those litigation costs until victory can be won.

Ultimately, if you’ve been sued or suspect you may be sued under the state or new federal law, you need to speak with an attorney who has experience fighting these claims. Give either Andy Arnold or Jeremy Summerlin a call at the Law Office of W. Andrew Arnold. (864) 242-4800.