A new bill has been introduced in Congress seeking to add a federal civil cause of action for trade secret theft.
The “Defense of Trade Secrets Act of 2014″ would permit a trade secret owner to bring a civil action for a violation of the Economic Espionage Act, which makes the theft or misappropriation of a trade secret a federal crime.
Unlike patents, copyrights, and trademarks, there is no federal civil cause of action for trade secret misappropriation. Today, trade secrets are protected only under state law, common law or contracts. However, with the increase in companies relying on trade secret protection and the international economy, companies are lobbying Congress to provide access to the federal courts to protect trade secrets and to place trade secret assets on the same playing field as patents, copyrights and trademarks.
Plaintiffs under the proposed legislation would be allowed to bring a civil cause of action for violation of sections 1831(a) and 1832(a) of the Economic Espionage Act, giving them access to the federal courts and various other remedies.
Section 1831(a) of the Act (Economic Espionage) criminalizes the misappropriation of trade secrets with knowledge or intent that the theft will benefit a foreign government. Penalties under section 1831 are fines up to $5 million per offense and up to $10 million for organizations, or three times the value of the stolen trade secret to the organization, including expenses for research and design and other costs of reproducing the trade secret that the organization has avoided (18 U.S.C. § 1831(a)).
Section 1832(a) of the Act (Theft of Trade Secrets) criminalizes the misappropriation of trade secrets related to a product or service used in or intended to be used in interstate or foreign commerce with knowledge or intent that the misappropriation will injure the owner of the trade secret. Penalties under 1832 are fines up to $5 million for organizations (18 U.S.C. § 1832(a)).
This new bill provides for remedies, which include injunctive relief, damages, unjust enrichment, a reasonable royalty in certain instances, and exemplary damages in an amount not more than three times actual damages. Further, the bill authorizes the court to issue an order seizing any property used to commit or facilitate the commission of the trade secret theft.
Lastly, this bill does not preempt other common law, the Uniform Trade Secrets Act or contractual causes of action.
This bill is a much needed mechanism for companies to protect their trade secret assets, but it still faces its challenges. Progress of this bill through Congress will be closely monitored and followed.