Feds Focus on Trade Secrets

Until recently, trade secrets have been mostly overlooked by federal lawmakers.  While federal laws govern patents, trademarks, and copyrights, trade secret protection has been left primarily to the states, most of which have enacted some variation of the Uniform Trade Secrets Act (which, itself, provides for no federal civil remedies).

But differences among state trade secret laws remain substantial (and often difficult to predict), and recent high profile examples of trade secret theft and economic espionage (see below) have illustrated the increasingly national scope of trade secret issues.

At the same time, intellectual property owners have become increasingly aware that trade secret laws sometimes offer more meaningful protection for valuable company information than patent and other laws.  Put simply, trade secret protection can include more diverse types of information than patent law, does not require the disclosure of sensitive information in connection with any registration process, and doesn’t expire after an arbitrary time.

Trade secrets now have the attention of federal lawmakers, as demonstrated by two pending bills.

Proposed 2014 Federal Trade Secret Legislation: And Then There Were Two

My partner Josh Cohen previously published a post detailing the first proposed federal trade secret legislation, the Defend Trade Secrets Act of 2014 (S. 2267), which was introduced in April.

In July, a second bill was introduced in the House — the Trade Secrets Protection Act of 2014 (H.R. 5233).

Both pending bills seek to create a federal civil remedy for trade secret theft.  The bills are similar: both would permit a trade secret owner to bring a federal civil action seeking redress for trade secret theft relating to a product or service that is used in, or intended for use in, interstate or foreign commerce.  Both bills also contain similar provisions regarding available remedies, which include damages, injunctive relief, potential fee shifting, and potential treble damages.

The Senate bill (the Defend Trade Secrets Act of 2014) would also allow for a trade secret owner to apply to the district court for an ex parte order for preservation of evidence and seizure of property used to commit trade secret theft.  The House bill (the Trade Secrets Protection Act of 2014) includes a similar mechanism, but imposes slightly higher procedural requirements before a seizure order can issue (including a showing of likely success on the merits of the trade secret claim).

Economic Espionage Act Roots

Both pending federal bills are technically amendments to the 1996 Economic Espionage Act, which was an early step toward increased federal  attention to the topic of trade secrets.  That Act criminalized acts of trade secret theft by foreign parties or governments, or by domestic parties if the trade secret relates to interstate commerce.

The concerns giving rise to the Economic Espionage Act have made some headlines recently.  In March, a man was found guilty of stealing DuPont’s trade secrets and selling them to a Chinese chemical company, and was later sentenced to 15 years in prison.  In May, an indictment was issued against five Chinese military officers, accusing them of stealing trade secrets of five companies specializing in solar panels, metals, and nuclear power plants.  New stories like this seem to emerge almost every week.

The pending federal bills would provide federal civil remedies in addition to the criminal penalties available under the Economic Espionage Act.

What about trade secret claims based on state law?

Neither of the pending federal bills would preempt the patchwork of existing state trade secret laws, so trade secret owners can continue to rely on state law even if one of the federal bills is enacted.  But for companies conducting business across several states, the new federal proposals may offer greater stability and predictability for pursuing trade secret thieves.