While the United States (U.S.) Secretary of State, John Kerry, gave a speech last month reaffirming the United States’ status quo on trade secret infringement abroad, a quiet but solid push is being made to fundamentally change trade secret law at home.
To date, trade secrets in the U.S. have primarily been protected by individual state statutes. Forty-seven states have adopted a model law called the Uniform Trade Secret Act (UTSA) under which a private cause of action can be brought for trade secrets infringement. The federal government has laws allowing for a private cause of action in patents and copyright, but not in trade secrets except for limited use of the Economic Espionage Act (EEA), and the federal Computer Fraud & Abuse Act (CFAA).
Two new bills relating to trade secret law
This picture may soon change as two bills to create a federal cause of action for trade secrets misappropriation are advancing through the U.S. House of Representatives and the U.S. Senate. The Trade Secrets Protection Act of 2014 is moving through the House (HR 5233) and the Defend Trade Secrets Act of 2014 is making its way through the Senate (S2267). Both bills have bi-partisan support from both political parties, in an otherwise partisan congress. Although it is still early in the legislative process, these bills, and the final product, should be watched carefully as they may significantly change U.S. trade secret law.
Although the definitions of “trade secret,” “misappropriations,” and “improper means” are almost identical to the UTSA’s version, both bills create a new ex parte seizure provision. This departure from UTSA would provide a path for trade secret owners to go to court, completely unopposed, and obtain an order to seize competitors’ property. Although some details about the ex parte provisions still remain vague – such as what property can be seized – the possibility that a trade secret holder could take competitors out of the marketplace for a period of time is very real.
The ex parte seizure provisions could pose a special obstacle to small startup companies, which often face barriers from larger companies with more resources. Although ex parte orders do not always result in unjust outcomes, errors are possible when decision makers are only fed one side of a complicated issue or story. Although it is unlikely that these bills will advance this year, due to the limited time left in this Congressional term, tangible progress toward federal trade secrets protection is being made. All parties may want to keep an eye on this legislation.