The House Introduces Another Trade Secrets Bill: Is It Really Any Better Than Before?

by Orrick - Trade Secrets Group
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http://blogs.orrick.com/trade-secrets-watch/files/2014/08/25083357-hacker-working-with-a-laptop-computer-and-hooks.jpgThe Trade Secrets Act of 2014 (H.R. 5233) was introduced in the House by Congressman George Holding on July 29, 2014.  Representatives Steve Chabot (R-OH), Howard Coble (R-NC), John Conyers (D-MI), Hakeem Jeffries (D-NY), and Jerrold Nadler (D-NY), are cosponsors of the bill.

While the House Bill is very similar to the Bill introduced in the Senate on April 29, 2014 Defend Trade Secrets Act of 2014 (DTSA) (S. 2267), there are some major differences between the two.  Specifically, the House Bill is much more protective of defendants facing ex parte seizure orders.

Under the Senate Bill, a plaintiff could seek, and the Court could grant, a broad order providing for the seizure of property used to commit misappropriation.  In contrast, the House Bill includes significant hurdles for a seizure order by requiring a plaintiff’s application to demonstrate the following through “clear” specific facts:

  • federal injunctive relief under FRCP 65(b) is inadequate because the defendant would evade, avoid, or not comply with such an order;
  • irreparable harm;
  • the harm to the plaintiff seeking the ex parte order outweighs the harm to the legitimate interests of the defendant and substantially outweighs the harm to any third parties who may be harmed by the seizure;
  • the plaintiff is likely to succeed in showing that the defendant has misappropriated the trade secret and is in possession of the trade secret;
  • a description of the matter to be seized with reasonable particularity and its location;
  • the defendant would destroy, move, hide or otherwise make the property inaccessible if the plaintiff provided notice to such defendant; and
  • the plaintiff has not publicized the request procedure.

Moreover, the House Bill includes several limitations to any seizure order, including:

  • the order must set forth findings of fact and conclusions of law;
  • it must minimize interruption of business activities of third parties as well as the defendant’s
    business activities;
  • it must restrict access of the plaintiff and not permit any copies of the seized property;
  • it must set a date for hearing no later than 7 days after the order has issued;
  • it must require the plaintiff to post an appropriate bond.

The House Bill further requires a court to take appropriate action to protect the defendant from publicity about any seizure order, including preventing the plaintiff from publicizing it.  The House Bill further provides a cause of action to any defendant who suffers a wrongful or excessive seizure against the plaintiff.

The House Bill effectively guts the efficacy of the seizure order leaving these authors to wonder if anyone would ever seek such an order.  We will continue to monitor this.

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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