Tailoring a public policy exception to trade secret protection

Abstract

The growing importance of information resources as well as mounting threats to proprietary information in the digital age propelled federalization of trade secret protection onto the national legislative agenda during the past year. This salience provided a propitious opportunity to address a critical, overlooked failing of trade secret protection: the lack of a clear public policy exception to foster reporting of illegal activity. The same routine nondisclosure agreements that are essential to safeguarding trade secrets can be and are used to chill those in the best position to reveal illegal activity. Drawing on classic law enforcement scholarship as well as established institutions for protecting proprietary information, this Article proposes a sealed disclosure/trusted intermediary exception to trade secret protection. This approach safeguards trade secrets while promoting effective law enforcement. The Article also recommends that nondisclosure agreements prominently include notice of the law reporting safe harbor to ensure that those withknowledge of illegal conduct are aware of this important public policy limitation on nondisclosure agreements and exercise due care with trade secrets in reporting illegal activity. Based on an earlier draft of this Article, Congress adopted a whistleblower immunity provision as part of the Defend Trade Secrets Act of 2016.