Locke Lord QuickStudy: Court Clarifies Immunity Defense Under Defend Trade Secrets Act

In an effort to keep you up to speed regarding the Defend Trade Secrets Act of 2016, we are writing to report about a recent case from the U.S. District Court for the District of Massachusetts clarifying aspects of the immunity defense made available to employees under the DTSA. At issue was a provision in the DTSA that provides immunity from civil or criminal liability to any person who discloses trade secrets belonging to another “solely for the purpose of reporting or investigating a suspected violation of law.”

In this very early decision under the new Act, the court in UNUM Group v. Loftus, 2016 WL 7115967 (D. Mass. Dec. 6, 2016), provided important guidance about the obligations of an employee who attempts to seek whistleblower immunity when he or she has removed trade secrets from the workplace without authority. The employee in this case was caught on surveillance video stealing a large volume of company files and records from his employer’s place of business. He was terminated, but refused to account for all of the stolen materials and also refused to return a company laptop. The employee claimed that he had provided everything to his lawyer and, when the employer sued, he sought to dismiss the claim for misappropriation of trade secrets, seeking the protection of the statutory immunity. The court held, however, that it is not enough for the employee simply to allege, without proof or clarity, some unspecified violation of law. Rather, the employee faces an affirmative burden to show “with certitude” that the misappropriated materials relate to some specific allegation of impropriety, that the materials are not being used for some other unauthorized purpose, and that the materials are no broader in scope than necessary to support the purported whistleblower’s claim. Employers should be mindful of these demands and should insist upon such certainty in any such cases in which employees misappropriate or disclose their trade secrets and then seek immunity.

We will continue to update you about new developments arising out of the DTSA.