September 23, 2014

House Judiciary Committee Approves Trade Secrets Legislation

Congress has taken another step toward enactment of federal civil trade secrets legislation. On September 17, 2014, the House Judiciary Committee approved H.R.5233, the Trade Secrets Protection Act of 2014, with a single amendment. The legislation will now move to the full House of Representatives for consideration. The Trade Secrets Protection Act of 2014 would create a federal private right of action for trade secrets theft and would permit a seizure order on an ex parte basis for the preservation of evidence. The agreed upon amendment adds language to the original bill protecting website operators who disclose misappropriated trade secrets from liability and seizures.

Session Overview

The markup was led by House Judiciary Committee Chairman Bob Goodlatte (R-VA) who gave opening remarks endorsing H.R.5233. Additional remarks were given by the sponsor and lead co-sponsor, Reps. George Holding (R-NC) and Jerry Nadler (D-NY). Two amendments were offered during the deliberations:

Holding Amendment — offered by Rep. George Holding (R-NC):
Rep. Holding, the sponsor of H.R.5233, submitted an amendment adding seizure and liability protections related to website operators. The Holding Amendment was approved by the committee on a voice vote.

The amendment contained three components:

  • Additional language clarifying that a seizure order cannot be issued unless the subject of the order is the misappropriator.
    • Rep. Holding stated that the new language will ensure website operators who publish a misappropriated trade secret cannot be subject to a seizure order even if the operator knew the trade secret was stolen.
  • A new section which provides that nothing in H.R.5233 limits the exemption of liability that website operators have for content published by third parties.
    • Rep. Holding stated that the new section will ensure that nothing in H.R. 5233 impacts other federal laws, particularly Section 230 of the Communications Decency Act, which exempts websites from liability stemming from content created by others.
  • A requirement that the attorney general conduct a study related to trade secret theft that occurs outside of the U.S.

Lofgren Amendment – offered by Rep. Zoe Lofgren (D-CA):
Rep. Lofgren (D-CA) submitted an amendment that would remove the ex parte provision from the bill. The Lofgren Amendment was rejected by the committee on a voice vote.

There was substantial debate on the Lofgren Amendment, during which Rep. Lofgren claimed that the ex parte provision could be used by larger companies against smaller startup firms. Chairman Goodlatte (R-VA), Rep. Nadler (D-NY) and several other supporters of the bill expressed their opposition to the Lofgren Amendment.

Rep. Hank Johnson (D-GA) offered support for the Lofgren Amendment and Rep. Raul Labrador (R-ID) asked a series of critical questions regarding the lack of ex parte provisions in state trade secret protection laws.

Background on Trade Secrets Legislation

The Trade Secrets Protection Act of 2014 has a companion bill in the U.S. Senate, the Defend Trade Secrets Act of 2014, sponsored by Sens. Christopher Coons (D-DE) and Orrin Hatch (R-UT). These two pieces of legislation are very similar, though the House bill only permits a civil claim for trade secret theft related to interstate or foreign commerce and provides greater limitations on the ex parte provision than the Senate version.

This legislative action in both the House of Representative and the U.S. Senate marks the latest attempt to create a private civil cause of action for trade secret theft. Several previous legislative attempts, starting in 2011, failed largely because of partisan disagreements. However these recent legislative efforts are more bipartisan in nature.

Next Steps/Future Considerations

H.R.5233 will now be considered by the full House of Representatives. However, due to scheduling and the upcoming congressional election, the earliest this bill could reach the floor of the House would be mid-November. Once H.R.5233 reaches the full House of Representatives, it will be debated again and could be amended further.

The Senate version of this legislation is still under consideration in the Senate Judiciary Committee. A closed door briefing was held on September 4, but no legislative markup has been scheduled to date.

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