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Trading Secrets A Law Blog on Trade Secrets, Non-Competes, and Computer Fraud

President Obama Signs Trade Secrets Clarification Act and House of Representatives Considers Enhancing Economic Espionage Act Penalties

Posted in Data Theft, Espionage, Legislation, Trade Secrets

On December 28, 2012, President Obama signed into law the Trade Secrets Clarification Act to ensure that the Economic Espionage Act will cover trade secret violations for products or services used or “intended for use” in interstate commerce or foreign commerce.

The Senate passed the legislation in November and the House of Representatives approved the legislation earlier this month.

 The legislation directly responds to the Second Circuit’s decision in U.S. v. Aleynikov, 676 F.3d 71 (2d Cir. 2012), which overturned a jury verdict finding the defendant violated 18 U.S.C. 1832(a) of the Economic Espionage Act by stealing computer code from his employer. The court held that the statute did not apply because the computer code failed to satisfy the requirement that the “product” was “produced for” or “placed in” interstate or foreign commerce.

The amended Section 1832(a) now applies to a trade secret “that is related to a product or service used in or intended for use in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof.” (emphasis added).

The House of Representatives is scheduled to vote today on a bill enhancing the penalties for violations of the Economic Espionage Act. Under the bill, the upper limit of penalties for individual offenses at Section 1831(a) would be increased from $500,000 to $5,000,000; the upper limit for corporate offenses at Section 1831(b) would be increased from $10,000,000 to the greater of $10,000,000 or 3 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 thereby avoided.

The Senate previously approved the bill. We will keep you updated on the bill’s status.