May 12, 2014

Company Trade Secrets May Get Federal Protection

Tomorrow, a U.S. Senate Judiciary subcommittee will hold a hearing to address whether current trade secret laws are strong enough to meet current threats of trade secret theft. A new bill introduced in Congress would give trade secrets uniform protection nationwide under federal law, and would let companies and citizens file suit in federal court against those who steal their trade secrets.

The Defend Trade Secrets Act (S. 2267), sponsored by Senators Chris Coons (D-DE) and Orrin Hatch (R-UT), amends the Economic Espionage Act to create a civil private right of action to protect trade secrets. The bill would help fight the increasing problem of trade secret theft, which costs American companies billions of dollars each year.

The proposed legislation would enhance trade secret protection by:

  • Creating a uniform federal standard
    Trade secret litigation is currently governed by state law, which creates inconsistencies in how trade secrets are defined and protected around the country. This bill creates a uniform definition of trade secrets and provides for consistent forms of relief. This uniformity will provide companies with more predictable methods for protecting trade secrets and enforcing their rights.
  • Strengthening remedies for trade secret theft
    The bill contains several tools for protecting trade secrets in federal court, including:
    • Ex parte orders to preserve electronic evidence of misappropriation and to seize computers and other property used in misappropriation.
    • Injunctions to protect trade secrets.
    • Money damages for misappropriation, including treble damages if the misappropriation is willful or malicious.
    • A longer, five-year period to seek relief.
  • Providing trade secret owners the advantages of federal court
    Federal court can give trade secret owners advantages, such as ease in serving discovery on non-party witnesses, and swift nationwide service of process. This bill would give trade secret holders access to the same forum as holders of other federally protected intellectual property, such as patents, trademarks, and copyrights.

Federal trade secret legislation has been proposed in the past, and the prospects for this particular bill are still developing. While the Senate bill enjoys bipartisan support, there are not yet sponsors in the House of Representatives for equivalent legislation.

Of note, on Tuesday, May 13, 2014, the Senate Judiciary Subcommittee on Crime and Terrorism will hold a hearing on trade secret theft entitled Economic Espionage and Trade Secret Theft: Are Our Laws Adequate for Today's Threats? In 2012, Crime and Terrorism Subcommittee Chairman Sheldon Whitehouse (D-RI) co-sponsored a similar bill with Senator Coons, the Protecting American Trade Secrets and Innovation Act, This previous attempt to enact federal trade secret protections stalled in the Senate Judiciary Committee, partially because it lacked bipartisan support.

We will monitor developments of S. 2276 closely. If you have questions about this proposed legislation or the protection of trade secrets in general, please feel free to contact any of the authors of this alert.

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