New Legislation Seeks to Bolster Trade Secrets Protection

New Legislation Seeks to Bolster Trade Secrets Protection Photos: Diego M. Radzinschi/NLJ. (l-r) Orrin Hatch and Christopher Coons.

A bill introduced Tuesday on Capitol Hill aims to give companies a new federal civil court venue to better protect against corporate trade secrets theft.

Sen. Chris Coons, D-Del., and Orrin Hatch, R-Utah, filed the Defend Trade Secrets Act to create the first federal right of civil action for trade secrets theft. Federal criminal law is insufficient, the lawmakers said in a written statement, and trade secrets theft accounts for losses of an estimated $160 billion to $480 billion each year in the United States.

“The intellectual property that drives the U.S. economy has never been more valuable, or more vulnerable,” Coons said in the written statement. “This bipartisan bill will empower American companies to protect their jobs by legally confronting those who steal their trade secrets. It will finally give trade secrets the same legal protections that other forms of critical intellectual property already enjoy.”

The Economic Espionage Act of 1996 made trade secrets theft a crime. Last year, the U.S. Department of Justice brought only 25 trade secrets theft cases, the lawmakers said. Instead, companies have used state-level civil trade secrets laws, which vary state to state and make it difficult for American companies to craft consistent policies.

In one closely watched case, E.I. du Pont de Nemours and Co. won a $919 million federal jury verdict in 2011 against South Korean textile company Kolon Industries Inc. over the alleged theft of body-armor secrets. DuPont sued under the Virginia Uniform Trade Secrets Act. The U.S. Court of Appeals for the Fourth Circuit on April 3 overturned the verdict.

Federal courts are better suited to working across state and national boundaries to facilitate discovery, serve defendants or witnesses, or prevent a party from leaving the country, Coons and Hatch said. The bill would also provide for injunctions and damages to preserve evidence, prevent disclosure and account for the economic harm to the companies.

“The legislation we’re introducing today takes a big step towards confronting bad actors seeking to steal intellectual property, and provides victims of trade secret theft with the legal protections they need,” Hatch said in the written statement.

A copy of the final bill’s language was not immediately available Tuesday morning.

The bill is the latest of several legislative attempts to create a federal cause of action for trade secrets misappropriation, according to an Orrick, Herrington & Sutcliffe blog post about a draft of the bill Coons circulated. Sen. Jeff Flake, R-Ariz., introduced the Future of American Innovation and Research Act in November 2013 and Rep. Zoe Lofgren, D-Calif., introduced the Private Right of Action Against Theft of Trade Secrets Act of 2013 in June 2013.

A draft of Coons’ bill tracks the Uniform Trade Secrets Act’s definitions of “trade secret” and “misappropriation,” includes standard remedies of damages and injunctive relief, and enables courts to seize property involved in the commission of the misappropriation, Orrick partner William Molinski, senior associate T. Wayne Harman and associate Scott Lindlaw wrote.

The new bill is broader than Coons’ bill from two years ago—Protecting American Trade Secrets and Innovation Act of 2012—that did not make it out of the Senate Judiciary Committee, the Orrick lawyers said.

This year could be different. Coons and Hatch said major companies and business interest groups—including 3M Co., Abbott Laboratories, Microsoft Corp., DuPont and the U.S. Chamber of Commerce—have endorsed the legislation.

Ed Pagano of Akin Gump Strauss Hauer & Feld said broad support from the business community highlights the need for the legislation. Pagano said he expects a hearing on Capitol Hill in mid-May.

Sen. Patrick Leahy, D-Vt., the Senate Judiciary Committee chairman, has signaled support for the bill. “It’s on a fast track,” Pagano said. “There’s strong momentum behind the bill.”

Contact Todd Ruger at truger@alm.com. On Twitter: @ToddRuger.

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