Sunday, May 4, 2014

Global Impact: US Senate Proposes Defend Trade Secrets Act, Some Considerations

According to, US Sens. Orrin Hatch (R-UT), current member and former Chairman of the Senate Judiciary Committee, and Chris Coons (D-DE), a member of the Senate Judiciary Committee, introduced legislation Tuesday (April 29) to help combat the loss of an estimated $160 billion to $480 billion each year in the United States to the theft of corporate trade secrets. 

The Defend Trade Secrets Act would empower companies to protect their trade secrets in federal court by creating a federal private right-of-action.
Sen. Hatch said:
American companies utilizing technology to grow and create more jobs increasingly face threats to the trade secrets that help drive their success. The legislation we are introducing today takes a big step towards confronting bad actors seeking to steal intellectual property, and provides victims of trade secret theft with the legal protections they need. 

Sen. Coons said:
The intellectual property that drives the US economy has never been more valuable, or more vulnerable. American companies are losing jobs because of the theft of trade secrets every day. This bipartisan bill will empower American companies to protect their jobs by legally confronting those who steal their trade secrets. It will finally give trade secrets the same legal protections that other forms of critical intellectual property already enjoy.

In today’s electronic age, trade secrets can be stolen with a few keystrokes, and increasingly, they are stolen at the direction of a foreign government or for the benefit of a foreign competitor. These losses put US jobs at risk and threaten incentives for continued investment in research and development.

Current federal criminal law is insufficient. Although the Economic Espionage Act of 1996 (EEA) made trade secret theft a crime, the US Department of Justice brought only 25 trade secret theft cases last year. 

State-level civil trade secret laws alone have not been sufficient to stop interstate theft. 

Federal courts are better suited to working across state and national boundaries to facilitate discovery, serve defendants or witnesses, or prevent a party from leaving the country. Laws also vary state-to-state, making it difficult for US companies to craft consistent policies.
The Defend Trade Secrets Act would:
  • Harmonize US law by building on the Economic Espionage Act to create a uniform standard for trade secret misappropriation. Companies will be able to craft one set of nondisclosure policies secure in the knowledge that federal law will protect their trade secrets.
  • Provide for injunctions and damages, to preserve evidence, prevent disclosure, and account for the economic harm to American companies whose trade secrets are stolen.
  • Be consistent with the approach taken to protecting other forms of intellectual property, such as patents, trademarks and copyrights, all of which are already covered by federal civil law.
The bill has been endorsed by the National Association of Manufacturers, the US Chamber of Commerce and companies including 3M, Abbott, AdvaMed, Boston Scientific, Caterpillar, Corning, DuPont, GE, Eli Lilly, Medtronic, Micron, Microsoft, Monsanto, Philips, Proctor and Gamble and United Technologies.

To see the full text of the the Coons-Hatch bill, S. 2267, see:

20140429 Coons, Hatch introduced S. 2267 Defend Trade Secrets Act

COMMENT: In the interest of clarity, although commendable, the substance of the proposed Defend Trade Secrets Act fails to address the following risks that US companies expose themselves to if they seek protection under the state or federal statutes:

1. Drawing attention to the fact that US companies do not effectively protect their trade secrets against theft;

2. Potentially places at risk trade secrets that already are vulnerable in the marketplace; and

3. Under the US system of jurisprudence, all proceedings and federal and state courts are subject to open-court transparency that potentially may place US trade secrets at risk.

Although prosecutions under the EEA have been small, the majority have been successfully litigated, which brings up the vital need for an anonymous and comprehensive survey as to WHY so many US companies are victimized as a result of ineffective trade secret protection.

Another facet that is also unknown is whether many US companies have not pursued protection under the EEA because of the inherent risks of impairment of their reputations.

Finally, before adding yet one more law that requires the FBI to enforce substantive law, have the Senators considered amending the EEA?

I fully acknowledge that it is the role in our system of government to continue to make new law, but how many statutes do we actually need? 

It might be useful to the success of S. 2267 if those introducing the bill were to differentiate how the EEA and DTSA differ.