On April 29, 2014, Senators Orrin Hatch (R-Utah) and Christopher Coons (D-Del.) introduced a bill that will enable trade secret owners to file civil actions for theft of trade secrets in federal courts. The bill would add the civil right of action for trade secret owners to the Economic Espionage Act, which presently gives only the federal government the right to bring actions against offenders.

The full text of the bill can be downloaded at: Defend Trade Secrets Act of 2014

It is estimated that the theft of trade secrets damages national economies worldwide between 1 to 3 percent each year. Senator Coons, in a press release issued with the introduction of the bill, reports that the estimated annual loss to the U.S. is between $160 and $480 Billion. (Coons Press Release).

This most recent attempt would put trade secret laws on par with other federal laws that protect patents, copyrights and trademarks. Presently, there are federal laws (e.g., Economic Espionage Act) as well as state laws (e.g., California Penal Code § 502) that criminalize trade secret theft. There is no federal law that provides the same uniformity to civil actions for trade secret theft. The sheer size of the estimated trade secret theft, the U.S. Government’s limited resources to investigate and prosecute the issue, and the challenges that companies face in quickly and efficiently responding to trade secret theft has prompted the renewed interest in federal legislation.

What are the advantages to the federal trade secret law?

• Direct access to the federal courts. Traditionally, trade secret theft claims have been asserted in state courts because the right to sue is based on state laws. The right to file these state-law claims in a federal court is limited. A federal trade secret law would allow trade secret owners the right to bring the case in federal court as a matter of right.
• Ex parte orders to preserve evidence and seize property. Either with an affidavit or verified complaint, the court may issue injunctions to: (i) preserve evidence, including by making a copy of electronically stored information; (ii) prevent any actual or threatened trade secret misappropriation; and (iii) allow for the seizure of any property that is used to “commit or facilitate” trade secret theft.
• Punitive Damages. Trade secret owners may seek punitive damages of up to three times the actual damages, which is more than the two times actual damages provided under many states’ laws;
• A five-year statute of limitation. Trade secret owners will have two years longer than the typical period of time under state law within which to file a lawsuit.

Like many state laws, the proposed bill provides for attorney’s fees in a number of instances that is intended to register caution for both sides to a trade secrets misappropriation claim. It provides that the court may award “reasonable” attorney’s fees if a misappropriation claim is brought in “bad faith,” a motion to “terminate” an injunction is made or opposed in bad faith, or a trade secret is willfully and maliciously misappropriated.

Lastly, the bill does not preempt (i.e., it leaves intact) any state law governing trade secret theft.

If the bill becomes law, this will allow trade secret owners to develop a uniform set of policies to deal with trade secrets protection. The bill is gaining support in the legal and business communities. Trade secret owners therefore should prepare for the potential enactment of this bill by reviewing their employment, confidentiality and non-disclosure agreements to make sure that they are taking advantage of the benefits of a nationalized standard for trade secret protection.

We will keep you apprised of updates about the Defend Trade Secrets Act as the bill winds its way through committee.