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

United States Senate Unanimously Approves the Theft of Trade Secrets Clarification Act

Posted in Data Theft, Espionage, Legislation, Trade Secrets

Last week, the United States Senate unanimously approved the Theft of Trade Secrets Clarification Act (“the TTSCA”). The TTSCA, which was co-authored by Senator Patrick Leahy of Vermont and Senator Herbert Kohl of Wisconsin, was introduced as S.3462 in order to strengthen the Economic Espionage Act of 1996 (“the EEA”). To achieve this goal, the TTSCA broadens federal law to ensure it addresses the theft of trade secrets related to a product or service used in interstate commerce.

Senators Leahy and Kohl decided to introduce the bill following the Second Circuit’s decision in the case of United States v. Aleynikov. In that case, the defendant allegedly stole software code from his former employer and took the code to his next employer in another state. At trial, Aleynikov was convicted of stealing trade secrets, however, on appeal, the Second Circuit interpreted the EEA narrowly, and found that the trade secrets relating to the source code Aleynikov had taken were not related to a product “produced for. . . interstate or foreign commerce,” and thus, were not entitled to protection.

The TTSCA seeks to strengthen the scope of the EEA to prevent results like the one in Aleynikov. Under the EEA, only trade secrets “related to or included in a product that is produced for or placed in interstate commerce” are protected. The Second Circuit interpreted this provision narrowly in Aleynikov, and found it only protected actual products intended to be placed in interstate commerce. Passing the TTSCA would expand the EEA to cover trade secrets “related to a product or service used in or intended for use in interstate or foreign commerce.” This would mean that the EEA would protect a broader range of trade secrets, including trade secrets with a relationship to a product or service intended for interstate use. Furthermore, the TTSCA would attempt to correct the Aleynikov loophole, and would mean that using a stolen product in interstate commerce is illegal. Please also see John Marsh’s informative blog on the new legislation, as well as Russell Beck’s blog entry.  

According to Senator Leahy, the legislation is “a straightforward fix, but an important one, as we work to ensure that American companies can protect the products they work so hard to develop, so they may continue to grow and thrive.” To become law, the TTSCA must also pass in the House of Representatives. The bill was referred to the House Committee on the Judiciary on November 28, 2012. We will continue to keep you apprised of future developments as the legislative process continues.