Do nondisclosure agreements protect trade secrets from whistleblowers?
This month, Facebook whistleblower Frances Haugen publicly revealed her identity on CBS ‘ 60 minutes and testified before a Congressional subcommittee on the matter. Ms Haugen was previously a member of Facebook’s civic disinformation team, and in a series of reports to the Securities and Exchange Commission, she detailed the ongoing illegal and unethical business practices. These include prioritizing profit over user safety, repeatedly lying to investors, and amplifying Capitol Hill’s Jan.6 attack on their platform. As a result, lawmakers discussed potential solutions to curb Facebook, including section 230 reform and a new national data privacy law.
Previously, we discussed the legal implications of Ms. Haugen’s testimony for whistleblowers and employers, as well as the implications for data privacy. In Part 3 of our series, we will discuss the trade secret and intellectual property implications of Facebook’s testimony.
What are the trade secret implications of Frances Haugen’s testimony?
According to reports from the The Wall Street Journal, the confidentiality agreement signed by Ms. Haugen with Facebook allowed it to disclose information to regulators, but not to share proprietary information. The company said it would not retaliate against Ms Haugen for testifying in Congress, but did not say whether it would respond to its release of information to the press and federal regulators. Trade secrets, as the name suggests, are the “secret sauce” that is the result of a company’s investment in research and development and what makes them better and different.
However, in an interview with the Associated Press, Facebook’s head of global policy management Monika Bickert said Ms Haugen ‘stole’ company documents, which highlights how Facebook can view Ms Haugen’s actions and may react differently on the road.
Moreover, confidential information is not the same as trade secrets, confidential information having its own protections, Davis Kuelthau Senior Counsel Michael J. Bendel explained to National review of law.
“From what I have seen, I do not know if her testimony, or the documents she has disclosed, amount to the level of trade secrets under the relevant law,” he said. . “The information is probably confidential information, and that can create its own grounds for protection and violation, such as a breach of a fiduciary duty it may have to Facebook, but to be a trade secret it takes more than just be confidential information. “
Do Non-Disclosure Agreements (NDAs) Protect Companies’ Trade Secrets?
Mr Bendel said two laws in particular could be important in determining whether the information would be considered a trade secret and the implications of sharing the information, including the California Uniform Trade Secret Act (CUTSA) and Federal Defend. Trade Secrets Act (DTSA). Both laws could be used by Facebook against Ms Haugen, since Facebook is headquartered in California.
Definition of a trade secret and how it interacts with CUSTA and DTSA
“Even after Frances Haugen’s situation, I predict that all the usual trade secret protections will still be available. The basic definition of a trade secret is: information generally unknown to the public that provides an economic benefit to its owner and reasonable efforts are made by the owner to maintain its secrecy, “he said.” We will need to look at the specific CUTSA and DTSA requirements to determine how a particular company proceeds to create a trade secret in its location and then what happens to cause improper disclosure of that trade secret where it occurs. product, and then what remedies are available to such a company to prevent that or seek damages and try to be free from such improper disclosure.
The NDAs protect companies’ trade secrets, but laws like the DTSA include whistleblower immunity as a safe haven to encourage employees to disclose information that may be a trade secret and evidence of a violation of the law by the NDA. ‘business, Bendel said.
“An employee takes the risk that secret business information is in fact such evidence of a violation (or likely to lead to such evidence) to qualify for immunity. Otherwise, CUTSA does not offer such immunity to whistleblowers, ”he said. “As another example, the DTSA expressly permits an aggrieved company to seek, without notice to the defendant, a court order to seize property in order to help prevent further damage to trade secrecy. Differently, CUTSA does not have the same recourse.
However, in order for companies to take advantage of its remedies under the DTSA when a case like Ms Haugen’s arises, they must include a safe haven clause in employee contracts, specifically stating that the company is committed to do not hold individuals responsible under federal or state trade secret laws. for the disclosure of trade secrets to a lawyer or representative of the federal, state or local government, directly or indirectly, for the purpose of reporting or investigating a suspected violation of the law. Additionally, the law does not allow employees to disclose trade secrets to private entities such as newspapers and social media networks.
“So in the Frances Haugen case where she shared information with The Wall Street Journal, it seems to create a clear problem for her under available trade secret law if trade secrets were taken from Facebook, as we know information was leaked without Facebook’s consent, ”Bendel said.
Conclusion: Does Your Company’s Confidentiality Agreement Protect Your Trade Secrets?
The effectiveness of a company’s NDA in protecting trade secrets depends on how the agreement is drafted. Although Facebook has said it will not retaliate against Frances Haugen for testifying in Congress, it is possible that they will decide to file a complaint against her for speaking to the press about their internal documents.
Even if Facebook decides to go this route, lawyers for whistleblowers told the National Law Review that Ms Haugen’s testimony could open the door for more whistleblowers to make similar allegations against other tech companies. Additionally, while a company may take action against an employee for disclosing trade secrets, it should not use nondisclosure agreements to conceal evidence of wrongdoing.
“This position has a broad basis in public order law which prevents private actors from using their private business activities, and even a trade secret, from being used to break the law,” Bendel said. “It’s a logic similar to that of the safe harbor approach, but based on the fact that we don’t want to allow people to hide behind certain tools like non-disclosure agreements and the protection of secrets. commercial, if the person / company uses these tools to hide activities that break the law.
Read part one of our series on Frances Haugen’s Facebook whistleblower testimony here.
To learn more about the privacy implications of Facebook whistleblower Frances Haugen’s testimony, click here.
Copyright © 2021 National Law Forum, LLCRevue nationale de droit, volume XI, number 296