Since 1975, the ratio of intangible assets (ideas, copyright, intellectual property, etc.) to tangible assets (physical property) in the S&P 500 market value has increased dramatically. In 1975, intangible assets made up just 17% of the market value and have done nothing but increase, reaching 87% in 2015.
As of May 22, 2016, a new federal trade secrets law known as the Defend Trade Secrets Act (DTSA) went into effect and Illinois employers need to be prepared.
Although it’s a federal law that places higher restrictions on protecting intellectual property, it does not block state or local laws, such as the Illinois Trade Secrets Act (ITSA). That means an Illinois employer can file a federal DTSA lawsuit and a simultaneous ITSA lawsuit, which means, even if the federal lawsuit doesn’t go their way, they may still be able to collect damages and/or awards under the ITSA.
Alternatively, businesses can sue under the ITSA if the statue of limitations under the DTSA has expired. Under the DTSA, a lawsuit must be filed within three years of the discovery of the transgression, but the ITSA allows up to five years.
One of the biggest changes created by the DTSA is that the new intellectual property law gives the court the power to order important property of the defendant to be seized, but only in certain circumstances. The court is only allowed to issue an order to seize property when they believe an injunction will not be sufficient, and if the potential harm done to the plaintiff by not seizing the relevant property is greater than the potential harm to the defendant by seizing the property.
If it later turns out the property was improperly seized, the defendant will then have an opportunity to seek awards for damages as a result.
In order to make sure companies don’t sue their employees under the DTSA as an intimidation or coercion tactic, the law includes provisions that allow defendants to recover attorney fees from the plaintiffs if they can prove the lawsuit was filed in bad faith.
The law also forbids employers from using the DTSA to inhibit employers from entering into an employment agreement. However, the potential for misappropriation of intellectual property does allow companies to place conditions on employment. That means companies cannot use the DTSA to prevent their employees from going to work for another company, but they can place restrictions on that new employment relationship, such as saying the employee cannot work for the competitor for six months after they have stopped working for the company.
The DTSA also cannot conflict with any state law, which is what makes it possible for companies to file a federal lawsuit under the DTSA and a state lawsuit over the same issue under the ITSA. The DTSA can help provide uniform rules and regulations for nationwide companies with employees in multiple states, but if the issue revolves around just one Illinois worker or multiple workers in the same state, then the prevailing intellectual property of that state would take precedence – not the federal DTSA.
It’s important to remember whistleblowers are immune from intellectual property laws, and that remains true under the DTSA. In fact, companies are required to provide notice of the whistleblower immunity provision, not just to their employees, but to everyone who works for them. That means including a notice of whistleblower immunity provision in your contracts with your consultants, contractors, etc.
Our Chicago trade secret and non-compete agreement attorneys have defended high level executives in covenant not to compete and trade secret lawsuits. A case in which our firm defended a former Motorola executive was covered in Crain’s Chicago business. You can view that article by clicking here.
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