Bipartisan legislation to prevent the misappropriation of business trade secrets nearly made it through Congress last year, but it got derailed by concerns that its application was too broad and could harm innocent third parties. But House and Senate sponsors think they have a solution that would allow them to move forward in the form of bipartisan legislation introduced in both chambers on July 29.
The Defend Trade Secrets Act (H.R. 3326 and S. 1890) would provide companies with federal civil law remedies that are available to other forms of intellectual property, such as patents, trademarks, and copyrights. It creates a federal private right of action and a uniform standard for the theft of trade secrets, which are intended to address the problem of inconsistent state laws that limit the availability of equitable remedies. It also allows companies to write a single set of nondisclosure policies that conforms to federal law.
“Congress has the responsibility to give industries the tools they need to protect their intellectual property and thus encourage job creation and economic growth,” said Rep. Doug Collins (R-GA), the sponsor of the House bill. “Trade secret theft is costing America billions of dollars and that price tag will continue to grow as technology and thieves become more sophisticated.”
Similar legislation in the last Congress failed to advance because of a provision in the Senate version to permit the seizing of property to prevent the dissemination of trade secrets. There was concern that the seizure remedy, which would have authorized courts to issue a seizure order based on an ex parte application to prevent the propagation or dissemination of the trade secret alleged to have been misappropriated, could be abused and harmful to third parties. To address those concerns, the new versions include a provision disallowing the seizure of property unless it “clearly appears from specific facts” that the harm of denying the application “substantially outweighs the harm to any third parties who may be harmed by such seizure.”
Under the Economic Espionage Act (EEA), the U.S. Department of Justice can bring criminal charges for theft of trade secrets in the service of foreign governments and companies in federal court, but there are no federal remedies to address the economic harm to American companies that have their data stolen. Instead, offenders face imprisonment of up to 10 years and may incur fines of up to $250,000.
“Unfortunately, in today's global information age, there are endless examples of how easy – and rewarding – it can be to steal trade secrets,” said Sen. Orrin Hatch (R-UT), the Senate sponsor of the bill. “Yet there are no federal remedies available to help victim companies recover from their losses.”
The EEA defines a trade secret to include all forms and types of financial, business, scientific, technical, economic, or engineering information, assuming the owner took “reasonable measures to keep such information secret,” and “independent economic value” is derived from the information “not being generally known to, and not being readily ascertainable through proper means by, the public.”