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Federal Trade Secret Protection Proposed in the Senate

June 05, 2014
Post by Blog Staff

Defend Trade Secrets Act of 2014

Senators Chris Coon (D-DE) and Orrin Hatch (R-UT) proposed a bill on April 29, 2014 that would provide federal protection for trade secrets. Under the current state of the law, trade secrets are protected by a combination of various state statutes, state common law, and aspects of contract law. There is no private federal cause of action for appropriation of trade secrets, although 18 U.S.C. 1832 is a criminal statute prohibiting theft of trade secrets.

The Defend Trade Secrets Act would allow an owner of a trade secret to pursue civil action in federal court for misappropriation of a trade secret used in interstate or foreign commerce. The proposed bill would also authorize the court to issue orders for the preservation of evidence in a civil action, including making a copy of electronic storage where the trade secret is located or allowing seizure of any property used to facilitate the theft of the trade secret. However, this seizure is limited to that which is not merely incidental and so long as the seizure does not interrupt the normal and legitimate business operations unrelated to the trade secret. This seizure will essentially be enforced through the requirements in paragraphs (2)-(11) of the Trademark Act of 1946.

The bill also provides for remedies including the granting of injunction against any actual or threatened violation of the Act and if appropriate, affirmative actions to protect the trade secret. Additionally, if injunction is inequitable, the court may condition the future use of the trade secret on the payment of a reasonable royalty for the time for which use could have been prohibited. The court may also award damages for actual loss and for any unjust enrichment caused by the misappropriation. Finally, if the trade secret is wilfully or maliciously misappropriated, the court may also award exemplary damages not to exceed three times the amount of actual damages. The Act would also allow for the granting of attorney's fees in this instance and in the situation where the claim of misappropriation was made in bad faith.

It is important to note that misappropriation is defined within the statute as using improper means to acquire the trade secret including: theft bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means. However, improper means does not include reverse engineering or independent derivation.

The text of this Act reads very similar to the Uniform Trade Secrets Act (USTA) which has been enacted by 48 states (New York and Massachusetts have not adopted this legislation). However, each state often modifies the UTSA allowing for different interpretations. Notably, the Defend Trade Secrets Act states that nothing in the Act would "preempt any other provision of law" and does not contain the language of the USTA which states that it "displaces tort, restitutionary, and other laws." Ultimately, this means that the Defend Trade Secrets Act still leaves the possibility for state law variations and allows plaintiffs to choose federal or state court for their action.

The Senate Judiciary Committee, Subcommittee on Crime and Terrorism held a hearing on May 13, 2014 concerning economic espionage and theft of trade secrets, including the proposed bill, and heard testimony from two panels of witnesses. No action has been documented since that date.


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The attorneys of McKee, Voorhees & Sease, P.L.C. designed this blog as an informational and educational resource about intellectual property law for our clients, other attorneys, and the public as a whole. Our goal is to provide cutting-edge information about recent developments in intellectual property law, including relevant case law updates, proposed legislation, and intellectual property law in the news.

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