10-6 WHISTLEBLOWER PROTECTIONS

• Jurisdiction: United States

10-6 Whistleblower Protections

A final key distinction between the federal and Texas statutes lies in the whistleblower protections under the DTSA. A common concern is that widespread trade secret protection has the potential to disincentivize would-be whistleblowers from using what might be a trade secret to divulge possible or known securities fraud to the Securities and Exchange Commission. The statutory response to this concern was to create an exception from liability under the DTSA for these potential whistleblowers. The protection under the statute shields the whistleblower from both civil and criminal liability under state and federal trade secret laws.³² It protects those who disclose a trade secret (1) in confidence to a government official or an attorney "solely for the purpose of reporting or investigating a suspected violation of law"; or (2) in a document filed under seal "in a lawsuit or other proceeding."³³ Notably, this provision of the DTSA falls under the exception to § 1838, meaning that it preempts or displaces other remedies, including those under applicable state law.³⁴

This whistleblower immunity provision contains an important notice requirement that may have negative effects on businesses that overlook it.³⁵ Under the DTSA, an employer must provide notice of the statute's whistleblower immunity in any employment agreement or contract covering the use of trade secrets or confidentiality.³⁶ If the employer does not provide notice to an employee, it forgoes any opportunity to recover exemplary damages or attorneys' fees from that employee in a trade secret misappropriation suit.³⁷ In light of this new disclosure rule, companies would be wise to review policies relating to trade secrets and confidentiality, and especially the agreements that are likely to cover those topics.

A recent court decision addressed how this provision works in practice. In this case, the plaintiff sued her former employer for discrimination, but after her termination kept her work laptop from which she ultimately disclosed to her attorney and then produced more than 22,000 pages of documents related to her claim.³⁸ The defendant counterclaimed under the DTSA based on her decision to retain and the information contained on her laptop. The court granted the plaintiff's motion to dismiss, finding that the DTSA's whistleblower provision afforded the plaintiff immunity for disclosure of the alleged trade secrets.

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Notes:

^[32] 18 U.S.C. § 1833(b)(1).

^[33] 18...