October 23, 2018

Defend Trade Secrets Act of 2015

On December 1, 2015, I joined with 19 other attorneys that specialize in trade secret law in writing to Congress in support of the Defend Trade Secrets Act of 2015 (S. 1890, H.R. 3326). Click here for the letter. Almost every year since the passage of the Economic Espionage Act that criminalized the theft of trade secrets, a bill has been introduced in Congress that would provide a civil counterpart. These attempts have previously gone nowhere. This year, however, Congress may actually pass such a bill. On December 2, 2015, the Senate Judiciary Committee heard testimony in support of the bill. It has bipartisan support and is sponsored by Reps. Hakeen Jeffries (D-N.Y.) and Doug Collins (R-Ga.) in the House, and Sens. Orrin Hatch (R-Utah) and Chris Coons (D-Del) in the Senate. Sen. Orrin Hatch said he believes that the bill could get through Congress before the new year.

“There is no doubt that China and other foreign competitors are working furiously to steal American innovation from all sectors of the economy, including the high-tech, life sciences, manufacturing, agricultural, aeronautics, financial services and energy industries,” Hatch, who chairs the Senate Finance Committee, said in a speech at the U.S. Chamber of Commerce.

Even though trade secret litigation continues to rise in tandem with the increasing number of methods that employees can use to steal a company’s trade secrets (flash drives, smart phones, cloud based storage devices), there is currently no federal civil cause of action that an employer can invoke if its trade secrets are misappropriated.  In most jurisdictions, trade secrets disputes are litigated in state courts under a version of the Uniform Trade Secrets Act. According to Hatch: “In the U.S., trade secrets are the only form of [intellectual property] where misuse does not provide the owner with a federal private right of action.

As a result, employers seeking to enjoin the misappropriation of a trade secret typically “plead themselves into federal court” by asserting a claim under the Computer Fraud and Abuse Act (CFAA).  While primarily a criminal statute, the CFAA also allows civil actions to be brought against an individual who “intentionally accesses a computer without authorized access, and thereby obtains … information from any protected computer if the conduct involved an interstate or foreign communication.”  (See 18 U.S.C. § 1030(a)(2).)  But where the CFAA is not applicable, employers have sparse civil federal remedies to invoke if trade secrets are misappropriated.

The Defend Trade Secrets Act of 2015 attempts to cure this situation.  The proposed bill seeks to enable employers and other trade secret owners to bring a federal civil action “if the person is aggrieved by a misappropriation of a trade secret that is related to a product or service used in, or intended for use in, interstate or foreign commerce.”   Under the bill, a successful plaintiff would be able to obtain injunctive relief, damages, unjust enrichment, royalties, and attorneys’ fees.

The bill also provides emergency relief.  If a trade secret owner can demonstrate, among other things, that immediate and irreparable injury will occur, and an injunction or restraining order will not be enough to prevent that harm, the bill authorizes a court to “seize” property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.  The bill allows a trade secret owner to seek this relief “ex parte,” or without the presence or participation of the opposing party.

While the measure hasn’t moved since it was introduced months ago, Hatch sees an opening to slip it through before the end of the year, as he sees little opposition to the measure.

“This is the type of bill that could move by unanimous consent before Congress adjourns for the holidays,” he insisted.

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