Intellectual Property Bulletin - Spring 2013: Legalizing “Hack-Back” Trade Secret Protections

Continuing the momentum for nationwide legal reform in response to recent high-profile international trade secret thefts, a panel of leading foreign policy and business experts issued a report last month calling for significant executive and legislative policy reforms – including enactment of a federal trade secrets statute and legalization of the right to “hack back.”

In its report, the Commission on the Theft of American Intellectual Property emphasized the considerable impact of intellectual property theft on the American economy. Not only are American companies losing hundreds of billions of dollars per year in earnings, but such theft is also undermining incentives for innovation. The Commission concludes that current methods for combating international trade secret theft, including World Trade Organization dispute resolution and bilateral government negotiations, are too time-consuming to satisfy the needs of companies whose products have rapid product life and profit cycles. Nor have these remedies imposed sufficient costs on trade secret perpetrators to outweigh the significant competitive advantages to be gained by stealing the innovative efforts of others.

The Commission recommends a multi-tiered strategy, both short-term and long-term, for reducing trade secret theft. It calls for greater involvement by the executive branch, designation of the National Security Advisor as the principal policy coordinator for all actions on the protection of American IP, and fortification of the International Trade Commission’s enforcement procedures to prevent the importation of counterfeit goods from abroad, and it suggests that IP theft be included in mandatory disclosures required by the Securities and Exchange Commission. With respect to legislative reform, the Commission recommends that Congress amend the Economic Espionage Act (EEA) to provide a federal private right of action to sue for damages associated with trade secret theft, and designate the Federal Circuit as the appellate court for all matters brought under the EEA. Over the longer term, the Commission recommends greater diplomatic efforts and institution-building in priority countries (such as China, India, and Russia) to change legal norms regarding IP rights.

Lastly, with respect to cybersecurity, the Commission recommends that Congress should consider legislative reform to allow American companies and individuals the right to counterattack against IP thieves. Such methods might include surveillance activities, activation of malware in hackers’ networks, and destruction of hackers’ computers. The Commission also suggests legalizing a limited right to “hack back” to retrieve stolen electronic files or to prevent the exploitation of stolen information, as long as doing so would not damage the intruder’s own network. Acknowledging that such counteroffensive measures are currently illegal under the Computer Fraud and Abuse Act and under international laws, in large part due to the risk to innocent third parties’ computers and networks, the Commission nevertheless concludes that such measures are necessary deterrents.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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