On April 27, 2016 the U.S. House of Representatives passed long-proposed legislation that would federalize trade secrets law, sending the bill to the White House for President Barack Obama’s promised signature.
The House voted 410-2 to pass the Defend Trade Secrets Act, which would allow companies for the first time to file civil lawsuits for trade secrets theft under the federal Economic Espionage Act. Currently, the statute provides only for criminal cases lodged by prosecutors; private civil cases must be filed under state law.
The bill already passed the Senate last month, meaning Wednesday’s vote of approval sends the DTSA to the president’s desk. The Obama administration has said it “strongly supports” the bill.
“This long-overdue legislation would protect businesses across the country from the growing threat of trade secrets theft,” said Rep. Jerrold Nadler, D-N.Y., one of the chief co-sponsors of the House version of the bill.
Unlike patents, copyrights and trademarks, trade secrets are currently exclusively handled at the state level. Though each state’s approach follows a blueprint laid out by the so-called Uniform Trade Secrets Act, some have complained that there are still major state-to-state differences in application of the law.
The primary goal of the DTSA is to further harmonize the law through a single federal statute, allowing for the development of more predictable, nationwide case law. It would also give litigants easier access to federal courts, which supporters say are better equipped than state courts to handle cross-state and international cases, as well as complex technological issues.
Michelle K. Lee, Under Secretary of Commerce for Intellectual Property, applauded those changes following the bill’s passage on Wednesday.
“Innovators, manufacturers, and entrepreneurs of all sizes will benefit greatly from access to federal courts — providing a more uniform way to take action and stronger tools to prevent the transit of trade secrets out of the country,” Lee said in a statement.
Since the earliest iteration of DTSA was introduced in 2012, its most controversial aspect has been a provision allowing courts to issue ex parte seizure orders to prevent the dissemination of a trade secret — a harsh remedy that’s unavailable under state law.
Facing concerns about abuse of such one-sided orders, lawmakers added limiting language to the bill that passed the House on Wednesday, including an express proviso that it should only be used in “extraordinary circumstances.” The bill also allows targets of such orders can also seek damages if they feel the provision has been abused.
Several other major amendments have been added in recent months to address similar concerns of overreach, like one aimed at preventing injunctions that unfairly limit employee mobility, and another that protects whistleblowers who disclose trade secrets in the course of reporting unlawful behavior.
Notably, the bill would not preempt the state laws already on the books. Unlike copyrights and patents that are explicitly mentioned in the U.S. Constitution, federal trade secret law draws its authority from the Commerce Clause; like trademark law’s federal Lanham Act, the DTSA will co-exist with state-level trade secrets law.
The bill has widespread support on both sides of the aisle, and was pushed heavily by the business world. The measure drew support from huge companies like Microsoft Corp., General Electric Co. and DuPont Co., as well as powerful lobbying groups like the National Association of Manufacturers and the U.S. Chamber of Commerce.