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Trade Secrets Protection Bill Pending Before the Senate and Judiciary Committee

Trade Secrets Protection Bill Pending Before the Senate and Judiciary Committee

White & Case Technology Newsflash

On July 29, 2015, congressional leaders in both the House and Senate introduced a bipartisan, bicameral legislation to help combat the theft of business trade secrets. The proposed bill, titled the "Defend Trade Secrets Act of 2015" ("DTSA"), if passed, will provide a federal civil cause of action for trade secret misappropriation by amending the Economic Espionage Act of 1996.[i] In 2013 and 2014, similar bills were introduced but were not enacted into law.

The DTSA largely parallels the Uniform Trade Secrets Act ("UTSA"), which has been passed in some form in nearly all states. For example, the definition for trade secret "misappropriation" is consistent between the DTSA and UTSA, and the proposed legislation sets forth similar remedies as the UTSA, including injunctive relief, compensatory damages, and exemplary damages and attorneys' fees in the case of willful or malicious misappropriation.[ii] Key differences exist as well. One such difference is that the federal bill provides for an ex parte seizure order that would allow a plaintiff to try and recover its misappropriated trade secrets before they are disseminated in advance of providing any notice of a lawsuit.[iii] Additional important differences include the following:

  • The DTSA provides for a five (year) statute of limitations period, while it is just three (3) years under the UTSA;
  • The DTSA provides for the recovery of treble exemplary damages, while the UTSA provides only double; and

  • The DTSA does not include language that preempts other causes of action arising under the common nucleus of operative facts, while the UTSA does include such language. [iv]

Supporters believe that a federal trade secrets statute is necessary because it will give trade secret owners access to federal courts like owners of other forms of intellectual property (namely, patents, trademarks and copyrights).[v] They also argue that the UTSA is not uniformly applied across jurisdictions which results in uncertainty for owners of trade secrets. Supporters of a federal trade secrets statute are in favor of providing the federal courts with power to enter ex parte seizure orders to help prevent trade secrets from leaving the country before an injured plaintiff can take action to cease the injury. [vi]

Critics, on the other hand, are concerned the proposed legislation will spur and incentivize trade secret trolling, due in part to the relatively low cost and ease of initiating a trade secret lawsuit as compared to bringing a patent infringement lawsuit, and also due to the power to obtain an ex parte seizure order before obtaining a judgment.[vii] Critics also believe there is already uniformity in the trade secrets law and that the addition of a federal statute will just cause confusion for trade secret owners.[viii]

Trade secrets are becoming increasingly important to companies of all sizes and types, and they are often times the most essential business asset. The misappropriation of trade secrets can threaten economic growth and jobs, so it is essential that federal law provides adequate protection for trade secret theft. The DTSA, if enacted, may provide companies an essential tool to protect new advances and encourage the creation of new technologies in a world where trade secret theft is on the rise.

 

[i] - Senate, House Leaders Introduce Bipartisan, Bicameral Bill to Protect Trade Secrets (July 29, 2015).
[ii] - Marcus Mintz, U.S. Congress to Again Consider Private Right of Action for Trade Secret Misappropriation, Seyfarth Shaw (July 30, 2015).
[iii] - See id.
[iv] - See id.
[v] - David R. Pruitt, Will Congress Enact a Federal Trade Secrets Act in 2015?,. Barnes & thornburg, llp (Dec. 2014).
[vi] - See id.
[vii] - David S. Levine, Here Come the Trade Secret Trolls, Wash. & Lee Law Rev. (Jan. 21, 2015).
[viii] - Pruitt, supra note 5.

 

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