Update Back From The Dead: Senators Resuscitate Legislation To Create A Federal Right Of Action For Trade Secret Theft

http://blogs.orrick.com/trade-secrets-watch/files/2014/02/shutterstock_1188014982-200x150.jpgWith a powerful industrial coalition lining up behind them, two senators are trying yet again to establish a federal right of civil action for trade secret misappropriation, potentially making trade secrets an IP stepchild no more.

Sens. Chris Coons (D-Del.) and Orrin Hatch (R-Utah) introduced the Defend Trade Secrets Act of 2014 on April 29.  As we reported in February (and as picked up today by the LegalTimes), Sen. Coons was then circulating a draft; by recruiting Sen. Hatch as a co-sponsor, he can now tout the bill’s bipartisan support.  Moreover, both are members of the Senate Judiciary Committee, which might help the bill’s odds of survival.

“This bipartisan bill will empower American companies to protect their jobs by legally confronting those who steal their trade secrets,” Sen. Coons said.  “It will finally give trade secrets the same legal protections that other forms of critical intellectual property already enjoy.”

According to Coons, the bill has won the support of the National Association of Manufacturers, the U.S. Chamber of Commerce and companies including 3M, Abbott, AdvaMed, Boston Scientific, Caterpillar, Corning, DuPont, GE, Eli Lilly, Medtronic, Micron, Microsoft, Monsanto, Philips, P&G, and United Technologies.

The bill, which varies little from the draft, is the latest of several recent attempts to bring about this right.  The past attempts include Sen. Coons’ own prior iteration of the bill, PATSIA 2012 (S. 3389), which never made it out of the Senate Judiciary Committee.

Like the earlier version of the bill, this one would allow American trade secrets owners to sue misappropriators in federal court for what would for the first time constitute a violation of federal law. The bill tracks the Uniform Trade Secret Act’s definitions of “trade secret” and “misappropriation,” includes standard remedies of damages and injunctive relief, and enables courts to seize property involved in the commission of the misappropriation.

This bill is broader than the 2012 version of the bill. In the latest version, plaintiffs no longer would need to include in their complaint “a sworn representation . . . that the dispute involves either substantial need for nationwide service of process or misappropriation of trade secrets from the United States to another country,” which was a significant limitation of the prior version of the bill. Further, the bill now covers the misappropriation of a trade secret that is “related to or included in a product, process, or service used in, or intended for use in, interstate or foreign commerce” (emphasis ours), as opposed to only a “product that is produced for or placed in interstate or foreign commerce.”   This language mirrors the amendment Congress made to the Economic Espionage Act in 2012, when it changed the EEA’s definition of misappropriation in the same way.  Congress made the EEA amendment to close a loophole created by the Second Circuit decision United States v. Aleynikov.  The new bill’s definition of misappropriation is consistent with the amended EEA and keeps the loophole closed.

We’ve been tracking the raft of proposed trade secrets laws for much of the last year.  Here, we update our primer to include the new bill.  We’ve also updated the chart to include bill numbers and links to status information via www.govtrack.us, and to reflect what our sources on Capitol Hill tell us about the prospects for these bills:

Bill

Sponsor

What’s It About?

Status

Defend Trade Secrets Act of 2014

Sen. Chris Coons (D-Del.) and Orrin Hatch

  • Would create a federal private right of civil action for victims of economic espionage (18 USC 1831a) and the misappropriation of trade secrets that involve interstate commerce (18 USC 1832b).
  • Available remedies would include damages, restitution, injunctive relief, punitive damages, and attorneys’ fees.  The act would also permit courts to issue ex parte seizure orders, allowing seizure of items (such as computers) used in connection with trade secrets theft, subject to certain procedural requirements
  • Would create an additional, non-exclusive federal remedy for the victims of trade secret misappropriation.

Introduced April 29, 2014

Future of American Innovation and Research Act

(S. 1770)

Sen. Jeffry L. Flake (R-Ariz.) 

  • First introduced on November 22, 2013, the act would allow trade secret owners to bring a civil action against a person who misappropriates a trade secret if that person is acting either outside of the United States or acting on behalf of a foreign actor.
  • The act would bring foreign actors within the jurisdiction of U.S. federal courts so long as the actors engaged in conduct that either takes place within the United States, or “causes or is reasonably anticipated to cause an injury” within the United States or to an American business or citizen. 
  • Available remedies include damages, restitution, injunctive relief, punitive damages, and attorneys’ fees.  The act would also permit courts to issue ex parte seizure orders, allowing seizure of items (such as computers) used in connection with trade secrets theft, subject to certain procedural requirements.

Referred to the Senate Judiciary Committee

Private Right of Action Against Theft of Trade Secrets Act of 2013

Rep. Zoe Lofgren(D-Cal.)

  • Introduced in the House on June 20, 2013, the bill would add a provision to 18 U.S.C. § 1832 that creates a private cause of action for the theft of trade secrets.
  • Under this amendment, reverse engineering is explicitly not actionable.

Referred to the House Committee on the JudiciaryThe bill has no co-sponsors, so action any time soon is unlikely.

Aaron’s Law Act of 2013

(H.R. 2454)

Rep. Zoe Lofgren(D-Cal.)
et al.

Referred to the House Committee on the JudiciaryLawmakers have not agreed on whether the bill’s approach is the right one, so its prospects are uncertain.

Cyber Economic Espionage Accountability Act

(H.R. 2281)

Rep. Mike Rogers (R-Mich.) and Rep. Tim Ryan (D-Ohio)

  • Introduced June 6, 2013, the bill broadly aims to secure the United States against cyber attacks sponsored by foreign governments.
  • The bill calls for the President to identify foreign government officials whom the President determines, “based on credible information,” are responsible for cyber theft of United States intellectual property.
  • The bill makes the identified persons ineligible to be admitted to the United States.
  • The bill directs the Secretary of State and Secretary of Homeland Security to revoke the visa of any such identified person.
  • The bill imposes financial sanctions, enabling the President to freeze property transactions by the identified individuals.

Referred to the Foreign Affairs, Judiciary and Financial Services CommitteesNot scheduled for any hearings at this time; prospects uncertain.

Deter Cyber Theft Act

(S. 884)

Sen. Carl Levin (D-Mich.) et al.

  • Introduced May 7, 2013, the bill would establish a “watch list” and “priority watch list” of countries that facilitate or engage in cyber theft of trade secrets from the United States.
  • As we previously reported, the bill would also require the President to direct U.S. Customs and Border Protection to bar imports from foreign countries on the watch list.

Referred to the Committee on FinanceSenate is obliged to take action first, and has not.

Strengthening and Enhancing Cybersecurity by Using Research, Education, Information, and Technology Act (“SECURE IT”)

(H.R. 1468)

Rep. Marsha Blackburn (R-Tenn.)

  • Introduced April 10, 2013, SECURE IT seeks to, among other things, facilitate the sharing of cyber threat information and create new deterrents for cyber criminals.
  • For instance, the act creates a limited exemption from antitrust laws for the sharing of cyber threat information between private entities. It further provides that an entity may disclose cyber threat information to any entity to assist with the investigation of threats to cybersecurity. (This portion of the bill might face the same opposition as CISPA — see below.)
  • SECURE IT further requires that federal agencies be informed of significant cyber incidents involving their federal information systems and that agencies adopt technologies to detect and remediate cyber intrusions.
  • The bill aims to amend certain provisions of the Computer Fraud and Abuse Act to include new criminal penalties for “aggravated damage” to certain “critical infrastructure” computers, such as those that control water supplies, electrical power delivery, and financial transactions.

Referred to the House Subcommittee on Crime, Terrorism, Homeland Security, and InvestigationsLawmakers have not agreed on whether the bill’s approach is the right one, so its prospects are uncertain.

Cyber Intelligence Sharing and Protection Act (“CISPA”)

(H.R. 624)

Rep. Mike Rogers (R-Mich.) et al.

  • First introduced in the House on November 30, 2011, and most recently re-introduced on February 13, 2013, the act aims to permit information sharing about possible cybersecurity threats among government agencies and private companies.
  • CISPA has divided the House and Senate and has faced opposition by privacy and civil liberties organizations.

The bill passed the House and was referred to the Senate but has not shown signs of advancement.  We reported earlier that the Senate would not be taking up the bill and that President Obama threatened to veto the bill because of privacy concerns.

 

 

Topics:  Misappropriation, Patent Litigation, Patents, Theft, Trade Secrets, UTSA

Published In: Civil Remedies Updates, Criminal Law Updates, Elections & Politics Updates, Intellectual Property Updates, International Trade Updates

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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