Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.
In an era where bipartisanship is rarely on display, a group of Senators and members of the House of Representatives from both parties recently joined together to propose the Defend Trade Secrets Act of 2015 (S. 1890, H.R. 3326). The bicameral bill, which was introduced and referred to both the Senate and House Judiciary Committees on July 29, 2015, proposes the creation of a federal civil cause of action for the misappropriation of trade secrets by amending the Economic Espionage Act of 1996, which criminalizes the theft of trade secrets.
Although similar legislation has been proposed in the past – just last year, the Defend Trade Secrets Act of 2014 was introduced in the Senate, and the Trade Secrets Protection Act of 2014 was introduced in the House – the comprehensive nature of the Defend Trade Secrets Act of 2015, coupled with the current political climate, may result in this bill becoming law.
Even though trade secret litigation continues to rise in tandem with the increasing number of methods that employees can use to steal a company’s trade secrets (flash drives, smart phones, cloud based storage devices), there is currently no federal civil cause of action that an employer can invoke if its trade secrets are misappropriated.1 In most jurisdictions, trade secrets disputes are litigated in state courts under a version of the Uniform Trade Secrets Act.
As a result, employers seeking to enjoin the misappropriation of a trade secret typically “plead themselves into federal court” by asserting a claim under the Computer Fraud and Abuse Act (CFAA). While primarily a criminal statute, the CFAA also allows civil actions to be brought against an individual who “intentionally accesses a computer without authorized access, and thereby obtains … information from any protected computer if the conduct involved an interstate or foreign communication.” (See 18 U.S.C. § 1030(a)(2).) But where the CFAA is not applicable, employers have sparse civil federal remedies to invoke if trade secrets are misappropriated.
The Defend Trade Secrets Act of 2015 attempts to cure this situation. The proposed bill seeks to enable employers and other trade secret owners to bring a federal civil action “if the person is aggrieved by a misappropriation of a trade secret that is related to a product or service used in, or intended for use in, interstate or foreign commerce.” Under the bill, a successful plaintiff would be able to obtain injunctive relief, damages, unjust enrichment, royalties, and attorneys’ fees.
The bill also provides emergency relief. If a trade secret owner can demonstrate, among other things, that immediate and irreparable injury will occur, and an injunction or restraining order will not be enough to prevent that harm, the bill authorizes a court to “seize” property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action. The bill allows a trade secret owner to seek this relief “ex parte,” or without the presence or participation of the opposing party.
Support for the Defend Trade Secrets Act of 2015 has come from many industries. Some of the nation’s biggest employers in the industrial, manufacturing, consumer goods, and medical devices sector, in addition to the Association of Global Automakers, the U.S. Chamber of Commerce and the Biotechnology Industry Organization, have all supported the bill. That the bill is being introduced while entering an election cycle is also significant, as candidates may look to appease businesses and trade associations and hold sway with voters. The bill is currently pending before the Senate and House Judiciary Committees. We will continue to monitor the bill’s progress and keep you informed of any updates.
1 Of course, an employer can assert a trade secret claim before a federal court under diversity jurisdiction where the parties reside in different states.