Trading Secrets : Trade Secrets Lawyers & Attorneys : Seyfarth Shaw Law Firm : Computer Fraud, Confidentiality Agreements, Corporate Espionage

U.S. Senators Herb Kohl (D-WI) and Christopher Coons (D-DE) introduced an amendment to the Currency Exchange Rate Oversight Reform Act yesterday aimed at protecting American trade secrets and innovation.

Currently, Title 18 of the US Code only permits the Attorney General to bring a civil action in federal court for trade secret theft. The amendments would open the federal courts to private parties as follows:  

(b)    Private Civil Actions

            (1)        In General-Any person aggrieved by a violation of section 1832 (a) may bring a civil action under this subsection

            (2)        Pleadings-A complaint filed in a civil action brought under this subsection shall-

                        (A)       describe with specificity the reasonable measures taken to protect the secrecy of the alleged trade secrets in dispute; and

                        (B)       include a sworn representation by the party asserting the claim that the dispute involves either substantial need for nationwide service of process or misappropriation of trade secrets from the United States to another country.

The amendment also provides for immediate ex parte seizure orders and damages for the unlawful conduct. 

Senators Kohl and Coons cited two examples of trade secret theft to support their amendment- a Chinese national convicted of stealing trade secrets valued between $50 and 100 million for a Chinese competitor, and a disgruntled Wisconsin employee that attempted to sell aviation related trade secrets valued at hundreds of thousands of dollars to a competitor. Their amendment would enable victims of trade secret theft to seek injunctive relief and compensation for their losses in federal court.

It is important to note that the amendment only provides private civil action when the trade secret theft victim shows a (1) substantial need for nationwide service of process or (2) misappropriation of trade secrets from the US to another country. A nationwide service of process would apply to cases where a state court may have difficulty acquiring personal jurisdiction over multiple defendants residing in different states. Thus, the amendment would provide relief in cases where the federal court’s jurisdiction extends beyond the territorial limitations of the state court.

The amendment aims to primarily protect American business against international and foreign misappropriators. Therefore, trade secret owners should not necessarily view this amendment as a free pass to federal court to assert trade secret claims.

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A company's trade secrets may be some of its most important assets.  Recent headlines underscore their importance, and vulnerability:

1. Recently, an employee was arrested at the airport and over 1,000 company proprietary documents containing trade secrets were seized that the employee was attempting to transport with her to her new job.
   
2.  A national retailer recently was hit with a $21.5 million verdict after a jury found the retailer liable for stealing the design of a popular home improvement tool. 
   
3. A former employee recently pleaded guilty in a U.S. District Court in California to stealing proprietary technologies from his former employer and selling or offering them for sale to foreign governments and military contractors.

A survey of companies estimated that in just one year, companies likely were to have lost as much as $53 to $59 billion dollars in proprietary information and intellectual property through theft and misappropriation.  Seeking trade secret counseling and an audit can assist clients to determine best practices to help protect their most important assets.

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