Congress recently took new steps to protect trade secrets, which are generally defined as all forms or types of financial, business, scientific, technical, economic, or engineering information that the owner has taken reasonable measures to keep secret and which derive independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public. Recent Congressional legislation designed to combat trade secret misappropriation expands the Economic Espionage Act of 1996 (EEA) and increases penalties for certain violations. This recent legislation may increase infringement referrals to and enforcement by the Department of Justice (DOJ). Moreover, Congress has momentum on trade secret issues that could generate additional legislation establishing a federal private right of action under the EEA in the future. The following summarizes the key changes from the recent legislation and comments on the implications of the recent developments.
Key Changes to the EEA -
Purpose: The EEA was enacted with the stated purpose of filling gaps in the federal law and promoting national and economic security in the high-technology information age. The statute reflects Congress’s recognition that proprietary information is essential to economic competitiveness and that it will only continue to increase in value. The EEA establishes two separate but related offenses.
Economic espionage: Section 1831 outlaws wrongfully copying or otherwise controlling trade secrets with the intent to benefit a foreign government, instrumentality, or agent. In response to mounting evidence that industrial espionage against major US corporations is accelerating, Congress recently passed the Foreign and Economic Espionage Penalty Enhancement Act of 2012 (Penalty Enhancement Act), which President Obama signed into law on January 14, 2013. The Penalty Enhancement Act increases the maximum penalties for economic espionage for both individuals and companies – individuals may be fined up to $5,000,000, and companies may be fined either $10,000,000 or up to three times the value of the stolen trade secret. The law also requires the United States Sentencing Commission to review whether it should amend the sentencing guidelines for violations of section 1831, which currently authorize jail sentences of up to 15 years.
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