New Federal Statute Strengthens Trade Secret Protection

by Morgan Lewis

Trade secret protection expanded to include products or services "used in or intended for use in interstate or foreign commerce."

On December 28, 2012, President Barack Obama signed into law the Theft of Trade Secrets Clarification Act of 2012 (the TTSCA), S. 3642, which broadens the scope of protection for trade secrets to include protection for products or services "used in or intended for use in interstate or foreign commerce." A related bill, the Foreign and Economic Espionage Penalty Enhancement Act of 2012, which was passed by Congress and is expected to be signed into law soon, will increase penalties for misappropriating trade secrets.


Congress passed the TTSCA in response to the highly anticipated decision from the U.S. Court of Appeals for the Second Circuit in United States v. Aleynikov, 676 F.3d 71 (2d Cir. 2012), which many observers felt unreasonably restricted trade secret protection. In that case, Sergey Aleynikov was convicted of stealing a proprietary computer source code associated with his employer's high-frequency trading system (HFTS) in violation of the Economic Espionage Act of 1996, 18 U.S.C. § 1832 (the EEA).

The indictment charged Aleynikov with "violating the EEA by downloading a trade secret 'that is related to or included in a product that is produced for or placed in interstate or foreign commerce,' with the intent to convert such trade secret and to injure its owner, to the economic benefit of anyone other than the owner[.]" Aleynikov, 676 F.3d at 74 (citing 18 U.S.C. § 1832(a)). Aleynikov appealed, and the Second Court vacated the conviction by reasoning that Aleynikov's employer had no intention of selling its HFTS system or licensing it to anyone. Because the HFTS system was not designed to enter or pass in commerce, or to make something that does, Aleynikov's theft of source code relating to that system was not an offense under the EEA. The Second Circuit narrowly interpreted the statute by holding that the EEA applies only to trade secrets that are part of a product that is produced for or placed in interstate commerce, rather than simply used in interstate commerce.

New Law

The TTSCA amended the EEA by replacing the bolded language in the phrase "or included in a product that is produced for or placed in interstate or foreign commerce" with "a product or service used in or intended for use in." The TTSCA now provides for protection of trade secrets relating not only to products but also services, which greatly expands protection. The law also affords protection of proprietary systems, tools, and instruments used by companies internally but not necessarily placed in interstate or foreign commerce.

Once signed into law, the Foreign and Economic Espionage Penalty Enhancement Act of 2012 will increase the maximum fine for economic espionage (i.e., stealing or obtaining, duplicating or conveying, or buying or possessing trade secrets without authorization and with the intent or knowledge that the offense will benefit any foreign government, foreign instrumentality, or foreign agent) committed by individuals (from $500,000 to $5 million) or by organizations (from not more than $10 million to not more than the greater of $10 million or three times the value of the stolen trade secret to the organization).

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.

© Morgan Lewis | Attorney Advertising

Written by:

Morgan Lewis

Morgan Lewis on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.