On Wednesday November 2, the Senate Judiciary Committee held a hearing on the pending Defend Trade Secrets Act of 2015, S. 1890. We have previously reported on the Act, which will create a federal civil cause of action for trade secret misappropriation, which includes an ex parte seizure provision.
The hearing began with Chairman Grassley making opening comments about the importance of trade secrets protection and meeting the increased threats of misappropriation in this global and mobile world. Each of the four witnesses then gave opening statements, followed by a question and answer period in which several members of the Committee took part. The witnesses included DuPont’s Chief IP Counsel Karen Cochran, Corning’s Chief IP Counsel Tom Beall, and Professor Sharon Sandeen (who opposes the Act). There were several notable moments at the hearing:
- Ms. Cochran, holding up a Kevlar® bulletproof vest, explained that DuPont’s experience in the Kolon case (in which Crowell & Moring represented DuPont) helped inform DuPont of the need for the Act. Specifically, she explained, (i) the need for assured access to federal courts in technology based trade secret cases and (ii) the need for access to the court to immediately halt the further dissemination of trade secrets and evidence destruction.
- Mr. Beall, displaying a small 50 kilometer spool of fiber optic cable that the Committee members marveled over, explained that Corning relies heavily on improving production efficiency and that this knowledge gained over years of improving the process for making products such as fiber optic cable is protected by trade secrets. He argued that state courts are not sufficient and criminal remedies such as the Economic Espionage Act are not a panacea due to the limited resources of federal investigators and prosecutors. He cited an example in which Corning sought and obtained a temporary restraining order in state court against a misappropriator, but by that time the individual had already left the country
- Ms. Sandeen expressed her concern that the Act will cause more problems than it solves, expressing concerns about litigation costs and the breadth of the seizure remedy.
Senator Hatch then noted that 15 bipartisan senators are in support of the Act including nine on the Committee. He also stated that he is not aware of any stake holder opposing the bill. He said the bill is ready to move and stressed that now is the time to act.
Senator Coons noted that the House version of the Act has 93 co-sponsors, suggesting that this wide-support was due to the common sense approach of the bill. He also noted that criminal remedies are simply not sufficient to meet the increased threat of trade secret theft, citing the fact that federal law enforcement brought only 15 cases last year.
Senator Coons also introduced three letters of support for the Act including a letter from several leading private practitioners (including Crowell’s Mark Klapow).
As the lone Committee voice against the bill, Senator Whitehouse expressed his concern with the seizure provision. He asked the witnesses to submit written responses to a series of questions including what degree of force may be used in execution of a seizure order and what privacy concerns are in play when a company’s computer system is seized to isolate the stolen information.
This is an exciting time in the trade secret arena. As further developments unfold, we will cover them here.