What is in this article?:
- How the Trade Secrets Act Will Benefit Manufacturers
- DTSA and Employment
The Defend Trade Secrets Act creates a "federal remedy that will provide a consistent, harmonized legal framework and help avoid the commercial injury and loss of employment that can occur when trade secrets are stolen."
Many times, Congress passes important bills that go unreported by the mainstream media. Such was the case with the Defend Trade Secrets Act of 2016 (DTSA - S. 1890), passed by the Senate and House of Representatives with near unanimous support in April and signed by President Obama on May 11, 2016. This beneficial bill was authored by U.S. Senators Chris Coons, D-Del. and Orrin Hatch, R-Utah, and cosponsored by nearly two-thirds of the Senate.
The bill was supported by a broad industry coalition that included manufacturers and organizations such as the Alliance of Automobile Manufacturers, Boeing Co., Caterpillar Inc., Corning Inc., Eli Lilly and Co., General Electric, Honda, IBM, Intel, Johnson & Johnson, National Association of Manufacturers, Procter & Gamble Co., Siemens Corp., Software & Information Industry Association (SIIA), U.S. Chamber of Commerce, and United Technologies Corp. This industry coalition sent a letter dated December 2, 2015 to Hatch, Coons and Sen. Jeff Flake, R-Ariz., saying in part:
"Trade secrets are an essential form of intellectual property. Trade secrets include information as broad-ranging as manufacturing processes, product development, industrial techniques, formulas and customer lists. The protection of this form of intellectual property is critical to driving the innovation and creativity at the heart of the American economy. Companies in America, however, are increasingly the targets of sophisticated efforts to steal proprietary information, harming our global competitiveness.
Existing state trade secret laws are inadequate to address the interstate and international nature of trade secret theft today. Federal law protects trade secrets through the Economic Espionage Act of 1996 (“EEA”), which provides criminal sanctions for trade secret misappropriation. While the EEA is a critical tool for law enforcement to protect the clear theft of our intellectual property, U.S. trade secret owners also need access to a federal civil remedy and the full spectrum of legal options available to owners of other forms of intellectual property, such as patents, trademarks and copyrights.
The Defend Trade Secrets Act will create a federal remedy that will provide a consistent, harmonized legal framework and help avoid the commercial injury and loss of employment that can occur when trade secrets are stolen. We are proud to support it."
The intent of the DTSA is:
"IN GENERAL.—Section 1836 of title 18, United States Code, is amended by striking subsection (b) and inserting the following:
‘‘(b) PRIVATE CIVIL ACTIONS.—
‘‘(1) IN GENERAL.—An owner of a trade secret that is misappropriated may bring a civil action under this subsection if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce."
‘‘(c) JURISDICTION.—The district courts of the United States shall have original jurisdiction of civil actions brought under this section.
However, the DTSA does not preempt state law. Therefore, the owner of a trade secret could potentially file a federal claim and a state law claim at the same time.
In a May 11, 2016 guest post on www.manufacturinglawblog.com by Ian Clarke-Fisher of Labor & Employment and Jim Nault of Robinson + Cole’s Intellectual Property Litigation Practice Team, they wrote, "…the DTSA provides the following important provisions, among others:
Federal Civil Action: The DTSA creates a federal civil cause of action, giving original jurisdiction to United States District Courts. This will allow companies to decide whether to bring claims in federal or state courts, and may have the net effect of moving most trade secret litigation to federal courts...Importantly, similar to federal employment laws, the DTSA does not supersede state trade secret laws."
"Seizure of Property: The DTSA includes a provision that permits the Court to issue an order, upon ex parte application in 'extraordinary circumstances,' seizing property to protect against improper dissemination of trade secrets…the DTSA permits such an order only if the moving party has not publicized the requested seizure…".
"Damages and Attorney’s Fees: In addition to the seizure of property and injunctive relief, the DTSA permits for the recovery of damages for actual losses and unjust enrichment, and allows for exemplary (double) damages trade secrets that are 'willfully or maliciously misappropriated'... The DTSA also provides for the recovery of reasonable attorney’s fees in limited instances…"
In a blog article prior to the bill's passage (April 8, 2016), Nuala Droney and James Nault, members of Robinson + Cole’s Intellectual Property Litigation Practice Team, commented: "The law provides for the award of damages for trade secret theft as well as injunctive relief. It even includes a provision allowing a court to grant ex parte expedited relief to trade secret owners under extraordinary circumstances to preserve evidence or prevent dissemination of the trade secret..."
They explained that "Trade secrets are a form of intellectual property that are of increasing importance to many manufacturers for a variety of reasons. A trade secret can be any information that is (i) valuable to a company, (ii) not generally known, and (iii) not readily ascertainable through lawful means, as long as the trade secret holder has taken reasonable precautions to protect it. A classic example of a trade secret is the formula for Coca-Cola. A more recent example is DuPont’s innovative Kevlar product, which was the subject of a large scale trade secret theft in 2006. Trade secret theft is a huge problem; a recent Pricewaterhouse-Coopers study showed that trade secret theft costs American businesses $480 billion a year."
Dennis Crouch, law professor at the University of Missouri School of Law and co-director of the Center for Intellectual Property and Entrepreneurship, provides this commentary on his blog:
“The Defend Trade Secrets Act (DTSA) includes a new provision added to the Economic Espionage Act (EEA) that, depending upon how it is interpreted, may govern how district courts handle trade secret information in all cases. The new section will be codified as 18 U.S.C. 1835(b) and reads:
(b) Rights Of Trade Secret Owners—The court may not authorize or direct the disclosure of any information the owner asserts to be a trade secret unless the court allows the owner the opportunity to file a submission under seal that describes the interest of the owner in keeping the information confidential….
Courts already liberally allow parties to file documents under seal – so that doesn’t provide the entire impact of the provision. Rather, the provision’s importance is that it extends beyond briefs being filed by parties and instead reaches disclosures at trial and court opinions. Thus, the statute presumably prevents a court from disclosing a trade-secret in its opinion without first providing the trade-secret owner with the opportunity to brief the issue of disclosure. In addition, it provides non-parties with a right to request (under seal) non-disclosure of their trade secret rights."