Last week the United States Senate unanimously approved legislation that would create a private right of action in federal court for trade secret theft. We reported on this legislation — The Defend Trade Secrets Act of 2015 – last summer, and explained how it would modify the Economic Espionage Act (EEA), 18 USC Chapter 90. See The Growing Momentum for Federal Trade Secrets Legislation.
The newly passed Senate bill, S. 1890, modified the proposed existing legislation in several key ways. The most critical for trade secret holders are as follows:
- Adding various tools available to the courts in connection with the “Civil Seizure” mechanism by providing federal judges with, among other things, the ability to “appoint a special master to locate and isolate the misappropriated trade secret information and to facilitate the return of unrelated property and data to the person from whom the property was seized.”
- Lowering the amount of exemplary damages available; reducing the amount recoverable from three times to two times the amount of: (1) actual loss caused by the misappropriation, (2) the unjust enrichment caused by the misappropriation of the trade secret that is not addressed in computation of the damages for actual loss, or (3) the reasonably royalty for the misappropriator’s unauthorized disclosure or use of the trade secret.
- Decreasing the limitations period from five years to three years, which makes the new legislation consistent with the Uniform Trade Secrets Act.
- Increasing the maximum criminal fines for misappropriating a trade secret from $5,000,000, to “the greater of $5,000,000 or 3 times the value of the stolen trade secret to the organization.”
- Adding a whistleblower-protection provision designed to shield whistleblowers from liability for the disclosure of trade secrets to the government and in the context of retaliation lawsuits, provided that steps are taken by the whistleblower to keep such information confidential.
So what’s next? The House Judiciary Committee has not yet acted on H.R. 3326, which was identical to the unamended Senate legislation. It was reported that when asked for comment about the prospects for that bill, and whether the Senate’s changes are acceptable, a committee aide responded only that “protecting American intellectual property from criminal theft remains a priority of the House Judiciary Committee.” See Senate Judiciary Oks Federal Trade Secret Bill (Bloomberg Law, 2016 The Bureau of National Affairs (Jan. 29, 2016). Bloomberg Law reports that in the latter part of 2015, the bill was held up due, in part, to the Senate’s focus on legislation meant to deal with patent trolls. However, since that legislation is taking longer than expected, the Senate went ahead with approving the amendments discussed above.