What Arizona Companies Need to Know About the Defend Trade Secrets Act

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What Arizona Companies Need to Know About the Defend Trade Secrets Act

The Defend Trade Secrets Act is one of the most significant pieces of intellectual property legislation in years. This law creates a federal cause of action for trade secret misappropriation as well as some new tools for protecting valuable business information, including whistleblower protections and ex parte civil seizures not provided for under state trade secret laws.

Unlike patents, copyrights and trademarks that are protected by federal registration, trade secrets are confidential business information that can include business plans, customer lists, financial information, research, technical and scientific data, and more.

Prior to enactment of the Defend Trade Secrets Act in 2016, the only remedy available for trade secret infringement had been through state statutes. If the infringement involved another state or country, companies have been forced to file suits in those jurisdictions, which can be costly and time consuming. The new law creates an avenue for companies to bring a cause of action for trade secret infringement in a federal court while not preempting a state’s implementation of the Uniform Trade Secret Act.

The new law also provides the following tools to protect trade secrets:

Ex parte civil seizure — under “extraordinary circumstances,” the law permits seizure without notice of trade secrets that have been misappropriated as “necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.”

Whistleblower protection — provides a safe harbor provision to allow employees with nondisclosure agreements to disclose trade secrets when reporting possible illegal activity.

Notice requirement for employers — companies must provide notice of whistleblower immunity to all employees governed by a nondisclosure agreement.

In addition, the Act prohibits any injunction that conflicts with Arizona law prohibiting the enforcement of non-compete agreements or any restraint of trade provisions.

Companies will need to weigh the pros and cons of filing a trade secret misappropriation claim in state or federal court. Your business attorney can advise you of the pros and cons of each venue for your specific cause of action.

When business disputes arise, you need experienced legal representation and advice. Williams Mestaz, L.L.P., is a law firm focusing on contract law, bet-the-company cases, and business divorce. Contact us at (602) 256-9400 and schedule a time to meet with us today.

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