Remarks on the Defend Trade Secrets Act of 2015

by Gwen Wei

On April 4, 2016, the Senate approved Bill S. 1890, the Defend Trade Secrets Act of 2015 (“DTSA”) with a vote of 87-0. While major media outlets everywhere greeted this show of bipartisan support with well-deserved astonishment, legal professionals focused on a single question: will such an act be worth its costs?

Since the 1970s, practitioners and academics have clamored for a federal remedy specific to trade secret theft. Such demands have only grown with time: in 2013, the Obama administration released a 140-page report. In it, the administration recognized the exponential increase in trade secret theft from U.S. corporations and in international economic espionage, and contemplated solutions to this increasingly charged issue.

As if in answer, the DTSA expands considerably upon the Uniform Trade Secrets Act (“UTSA”), which currently protects trade secrets only at the state level. The proposed legislation authorizes trade secret owners to bring a civil action in federal court for the misappropriation of a trade secret related to a product or service either used in, or intended for use in, interstate or foreign commerce. The bill, commentators have suggested, could not have come at a more opportune time. While the Economic Espionage Act of 1996 (“EEA”) contains provisions to combat trade secret theft on both the national and international scale, practitioners have established that proving ‘loss’ under the EEA is far from a straightforward process. As such, only a fraction of the cases submitted to the U.S. Attorney General are accepted, due to limited prosecutorial resources and a higher burden of proof. By expanding on the EEA’s precedent for allowing federal suits for trade secret misappropriation, the DTSA potentially resolves tensions between often-disparate state laws. It offers, in short, an increased sensitivity to the time-critical nature of misappropriation of industry secrets.

But the latest draft of the DTSA goes farther than its predecessors ever contemplated. Unlike the UTSA, the proposed legislation extends the statute of limitations on bringing a misappropriation claim, refuses to preempt other causes of action arising from the same circumstances, and allows courts to issue ex parte seizure orders prior to giving notice of the lawsuit. A letter published in November 2015 claimed that the DTSA’s nebulous and overextended provisions only complicate the application of existing trade secret law. Signed by thirty-one professors at law schools across the country, the letter argues that the lack of definition for the term ‘property’ under the ex parte provision opens the doors to easy abuse; that the Act will extend the length and cost of trade secret litigation; and that the bill’s apparent recognition of the so-called ‘inevitable disclosure’ doctrine endorses a new barrier to mobility of labor and so creates a new level of tension with existing case law. Indeed, criticism regarding the DTSA’s ex parte provision echoes recent academic concerns that overextended trade secret legislation may give rise to the hitherto-unknown trade secret troll: an alleged trade secret-owning entity “that uses broad trade secret law to exact rents via dubious threats of litigation directed at unsuspecting defendants.”

Even on its own merits, however, the DTSA still falls short. The bill fails to address one of the primary motivators behind its creation: concerns regarding international cyber-espionage targeting U.S. companies. But this, one professor has suggested, may be due to the natural limits of the legal system. Rather, the solution to trade secret theft may not exist in civil remedies at all, but in encouraging the development of better technology to fend off such attempts.

Regardless, demand for better solutions is unlikely to diminish in the near future. The practice of trade secret theft continues to thrive as new cases arise on both state and international levels and thieves develop fresh security breach methods via new technological breakthroughs. What will become of the DTSA remains to be seen as it awaits consideration with the House Committee on the Judiciary as H.R. 3326.

Image from: SRR