Federal Trade Secrets Law–-The Defend Trade Secrets Act / Trade Secrets Protection Act 2014

September 12, 2014

US CapitolTrade secret assets are primarily protected under state laws, most of which are based on the Uniform Trade Secrets Act.  Federal criminal law of Title 18, The Economic Espionage Act (EEA) protects trade secrets only in cases of economic espionage (in which the theft was committed “intending or knowing that the offense will benefit any foreign government, foreign instrumentality, or foreign agent”) and in cases of theft “with intent to convert a trade secret, that is related to a product or service used in or intended for use in interstate or foreign commerce.”  There is currently no federal civil cause of action for trade secret misappropriation.

In 2008 R. Mark Halligan (internationally-prominent trade secret practitioner and scholar, and contributing author to my West Thomson Reuters treatise) detailed the strong legal and economic reasons for creating a federal trade secrets right. Specifically, in Protection of U.S. Trade Secret Assets: Critical Amendments to the Economic Espionage Act of 1996, he advocated (1) adding a private civil cause of action to the EEA and (2) adding ex parte seizure provisions.  Since then US industry has lost billions of dollars (more) worth of trade secrets.

The U.S. House and Senate both have pending trade secret protection legislation, entitled, respectively, the Trade Secrets Protection Act of 2014 (House version) and the Defend Trade Secrets Act of 2014 (Senate version). These Acts create a federal civil cause of action for any act that violates the federal criminal statutes mentioned above, as well as create a cause of action for misappropriation of a trade secret that is related to a product or service used in, or intended for use in, interstate or foreign commerce. Importantly, these acts also create ex parte seizure rights. Mr. Halligan was instrumental, through his 2008 article and more recently, work with Sen. Kohl during the 112th Congressional session, in helping shape the (Senate version of) the new proposed law.

In addition to the proposed legislation having bipartisan support, it also has the overwhelming support of the legal community and industry.

trade secrets act coverThe National Association of Manufacturers  applauded the law as necessary to protect competitive interests as well as cited the additional need to enhance protection in order to fulfill trade agreement commitments.   Former executive director of the American Intellectual Property Law Association Q. Todd Dickinson cited the lack of uniformity of the “patchwork” of state laws . David Kappos, former director of the USPTO also supported the law, stating that it “would provide much-needed relief to US innovators that have suffered for too long”.

Academics also support the new law. Representative of these academics is Mark Schultz, senior scholar and co-director of the Center for the Protection of Intellectual Property at George Mason University School of Law, who cites expediting containment of trade secret losses containment as a crucial.

There is some academic opposition to the new law, led by David S. Levine, who co-authored an open letter to Congress, signed by 31 academics.

Mr. Halligan, both a scholar and a practitioner with decades of experience working with industry, strongly favors the Defend Trade Secrets Act of 2014, stating in an e-mail to me,

“US corporations are victims and they need access to the federal courts–with national service of process and extraterritorial jurisdiction– to protect trade secret assets; the passage of this legislation is in the national and economic interests of the United States.”

The House hearing on the Trade Secrets Protection Act of 2014 was scheduled for September 10th, but was continued to next week.