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Commercial LitigationTrade Secrets

The Defend Trade Secrets Act of 2014 (S. 2267) marks the latest attempt at creating a federal civil cause of action for fighting trade secret theft

May 16, 2014

Commercial LitigationTrade Secrets

The Defend Trade Secrets Act of 2014 (S. 2267) marks the latest attempt at creating a federal civil cause of action for fighting trade secret theft

May 16, 2014

Back to Fish's Litigation Blog

 

While the Economic Espionage Act of 1996[1] (the “EEA”) presents an important weapon for use in combatting trade secret theft, it is a criminal statute and creates no private civil cause of action for injured parties. Sure, restitution is available under the EEA, but injured parties often wish to be more involved in the justice-seeking process than just referring their case to the Department of Justice and assisting with the investigation—assuming one is initiated at all. Also, victims of trade secrets theft often want to obtain injunctive relief and/or recover attorney’s fees and exemplary damages— remedies which are not available[2] to private parties under the EEA. To seek such relief, they sue under one of the state law forms of the Uniform Trade Secrets Act (UTSA) (or, in Massachusetts, New York, and North Carolina, other state statutory law and/or common law). And, though the very purpose of a uniform act is to establish uniformity across jurisdictions, there are some differences between the various states’ versions of the UTSA or in differing state courts’ interpretation of common UTSA provisions. Also, civil litigants are often reluctant to stir up parallel criminal proceedings under the EEA, where the invocation of Fifth Amendment by key witnesses may bring civil proceedings to a grinding halt. For these reasons, there has been significant discussion (and legislative effort) in recent years toward the creation of a civil trade secret theft cause of action. S. 2267, titled the Defend Trade Secrets Act (the “DTSA”), is the latest such development (the text of the bill is available at http://www.gpo.gov/fdsys/pkg/BILLS-113s2267is/pdf/BILLS-113s2267is.pdf).

Senators Coon (D-Del) and Hatch (R-Utah) introduced S. 2267 on April 29, 2014 (Sen. Coons’s press release is available at http://www.coons.senate.gov/newsroom/releases/release/senators-coons-hatch-introduce-bill-to-combat-theft-of-trade-secrets-and-protect-jobs), touting the bill as a means to better protect American intellectual property, which “has never been more valuable, or more vulnerable.” The bill is said to harmonize U.S. law, provide for injunctions and damages, and be consistent with the approach taken to protecting patents, trademarks, and copyrights. It has garnered endorsements from the National Association of Manufacturers, the U.S. Chamber of Commerce, and a number of Fortune 500 companies.

In essence, the DTSA is a federal version of the UTSA. Like the UTSA, the proposed law provides for potential treble damages and awards of attorney’s fees, and allows injured parties to seek injunctive relief and ex parte orders preserving and/or calling for the seizure of evidence. However, the five-year statute of limitations is more generous than some states’ versions of the UTSA. Also, the proposed DTSA provides for ex parte orders for preservation and seizure of evidence—particularly important given that most evidence of trade secret theft is electronic and thus subject to instantaneous destruction. And, of course, the creation of a federal cause of action would presumably allow more trade secret theft victims to seek redress in federal courts, without need for diversity of the parties.

Questions remain as to what effect the DTSA will have on the trade secret litigation landscape, if passed in its current form. The bill expressly provides that it will not preempt state law causes of action, so its ability to harmonize the law is somewhat limited. One can assume that state law causes of action for trade secret misappropriation would continue to be asserted (even in federal court) when preferable to plaintiffs. Also, without federal preemption, plaintiffs who can avoid diversity-based removal will continue to have the option of suing in state courts, to access different judges and jury pools.

 

[1] For a more detailed discussion of the referral of commercial trade secret theft for federal investigation and prosecution, see these earlier blog posts: http://www.fr.com/fish-litigation/calling-cops-decision-refer-trade-secret-theft-criminal-investigation-part-one/ and http://www.fr.com/fish-litigation/calling-cops-decision-refer-trade-secret-theft-criminal-investigation-part-two/.

[2] Section 1836 of the EEA does allow the DOJ to seek injunctive relief through civil proceedings, but injured parties have no say in the seeking or enforcement of such relief. Likewise, the EEA provides for substantial criminal penalties, but the victims do not receive any fines collected.

Related Tags

Trade Secrets
trade secret litigation
DTSA
Economic Espionage Act
UTSA

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Tommy Jacks | Of Counsel

Tommy Jacks is Of Counsel to the Austin office of Fish & Richardson. His practice emphasizes general commercial litigation. Mr. Jacks has over 40 years of experience in general litigation on a wide range of complex commercial, qui tam, class action, professional liability,...

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