Courts Continue to Find the Federal Trade Secrets Act Reaches Extraterritorial Conduct

At a Glance

• In a recent decision from the Western District of Pennsylvania, a federal district court concluded that the Defend Trade Secrets Act (DTSA) reached a former employee’s conduct even though the employee worked wholly outside the United States and had not been in the United States for two years prior to the misappropriation. The court reasoned that the former employee receiving the trade secrets from the United States was a sufficient “act in furtherance” of the misappropriation to trigger the DTSA’s extraterritorial effect.
• After concluding the DTSA reached the defendant, the court separately analyzed whether the court could exercise personal jurisdiction over him. The court went through the separate personal-jurisdiction analysis for that issue and determined that it did have personal jurisdiction over him.

Summary

Courts across the country have found that the DTSA can reach a foreign defendant’s conduct when — in the words of 18 U.S.C. § 1837(2) — “an act in furtherance” of the misappropriation was committed in the United States. Faegre Drinker attorneys have covered in prior alerts the law developing around the extraterritorial reach of the DTSA:

• Seventh Circuit Confirms Extraterritorial Reach of the Defend Trade Secrets Act
• Supreme Court Rejects Request to Review the Extraterritorial Reach of the Federal Trade Secret Act

More Detail About the Pennsylvania Federal Case

In XCoal Energy & Resources v. Asanome, Case No. 22-968, the defendant was a Japanese citizen who worked in Japan for plaintiff XCoal’s Japanese affiliate, which was also a plaintiff in the case. As part of his role, the defendant was given access to trade secrets stored on the plaintiffs’ U.S. servers in Pennsylvania. The defendant eventually went to work (still from Japan) for a competitor based in Pennsylvania. The plaintiffs alleged that, prior to his departure, the defendant extracted trade secrets and shared them with the competitor.

The plaintiffs brought claims under the DTSA. The defendant moved to dismiss alleging, in part, that the DTSA did not reach his conduct because he was not in the United States during the alleged misappropriation and had not even been in the United States for a full two years prior to the alleged misappropriation. But the court found it was sufficient that the defendant received trade secret information from a U.S. company and that the information was stored on U.S. servers or sent from U.S. individuals. In reaching this conclusion, the court noted that: “there must be at least something tying the alleged wrongdoing to the United States, but the bar there is relatively low. As long as the defendant received some of the trade secrets from the United States, subsequent misappropriation, even if it occurs abroad, would fall under the scope of the DTSA.”

After concluding the DTSA reached the defendant, the court also analyzed whether the court could exercise personal jurisdiction over him. To resolve this issue, the court went through a separate personal-jurisdiction analysis and concluded that it could exercise personal jurisdiction over him.

Takeaway

Courts across the country continue to find that there is a relatively low burden for the DTSA to reach extraterritorial conduct. In XCoal Energy, the plaintiffs met their burden by showing the trade secrets were stored in the United States and the defendant received them from the United States, even though the actual misappropriation occurred entirely outside the United States. Given this relatively low burden, trade secret plaintiffs should consider whether misappropriation occurring outside the United States is actionable in the United States under the DTSA. As part of that calculus, trade secret plaintiffs should also consider that, even when the DTSA could reach conduct outside the United States, the court will also need to be able to exercise personal jurisdiction over the defendant, which is a separate inquiry.