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Trade Secrets Protection Bill Approved by Senate

Thursday, April 07, 2016
Sandler, Travis & Rosenberg Trade Report

The Senate approved April 5 legislation (S. 1890) to strengthen efforts to combat the theft of trade secrets by allowing companies to defend their trade secrets (e.g., customer lists, algorithms, software codes, unique designs, industrial techniques and food recipes) in federal court. The White House said it “strongly supports” this measure because it “would provide businesses with a more uniform, reliable, and predictable way to protect their valuable trade secrets anywhere in the country.” Bill sponsor Sen. Orrin Hatch, R-Utah, said the bill is expected to pass the House of Representatives and be signed into law by President Obama in the coming weeks.

A press release from Hatch’s office states that this bill is needed because current federal criminal law is insufficient. Today “trade secrets can be stolen with a just a flash drive and a few keystrokes,” and “increasingly this critical information is stolen at the direction of a foreign government or for the benefit of a foreign competitor.” Although the Economic Espionage Act of 1996 made trade secret theft a crime, “the Department of Justice lacks the resources to prosecute many such cases” and “state-level civil trade secret laws alone have not been sufficient to stop interstate theft.”

In response, the press release states, this bill creates a federal civil cause of action for trade secret misappropriation that models the Uniform Trade Secrets Act. A cause of action requires a showing of acquisition of a trade secret by improper means and disclosure or use of a trade secret by a person who had reason to know it was acquired by improper means or under circumstances giving rise to a duty of secrecy.

Additionally, in extraordinary circumstances a court may order an ex parte seizure based on the requisite showing that such an order is necessary to prevent destruction of evidence or dissemination of the trade secret. A court-ordered seizure must provide for the narrowest seizure necessary, that is least burdensome to the subject and that allows the accused to seek damages in case of wrongful or excessive seizure.

Further, the press release adds, the bill authorizes the award of damages to trade secret owners consistent with the Uniform Trade Secrets Act, including enhanced damages for willful and malicious misappropriation. It also establishes economic espionage and trade secret misappropriation as RICO predicate offenses.

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