By Robert Milligan and Joshua Salinas
Representative Zoe Lofgren (D- CA) has been very active in the technology and innovation legislation space of late. Last week, Representative Lofgren and Senator Ron Wyden (D-OR) formally introduced companion bills, nicknamed “Aaron’s Law,” in the House and Senate seeking to amend the Computer Fraud and Abuse Act. Almost unnoticed was the fact that Representative Lofgren also introduced last week a potentially significant bill that would provide a private civil claim for trade secrets theft under the Economic Espionage Act (“EEA”).
Specifically, Representative Lofgren introduced H.R. 2466, which is titled “Private Right of Action Against Theft of Trade Secrets Act of 2013” (“PRATSA”). Similar to the PATSIA legislation that was proposed last year, PRATSA provides a private civil action for trade secrets theft by amending the EEA.
PRATSA is much for simpler than PATSIA, however, and adds only the following two subsections to 18 U.S.C. Section 1832:
‘(c) Any person who suffers injury by reason of a violation of this section may maintain a civil action against the violator to obtain appropriate compensatory damages and injunctive relief or other equitable relief. No action may be brought under this subsection unless such action is begun within 2 years of the date of the act complained of or the date of the discovery of the damage.
‘(d) For purposes of this section, the term ‘without authorization’ shall not mean independent derivation or working backwards from a lawfully obtained known product or service to divine the process which aided its development or manufacture.’
Section 1832 presently provides:
(a) Whoever, with intent to convert 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, and intending or knowing that the offense will, injure any owner of that trade secret, knowingly–
(1) steals, or without authorization appropriates, takes, carries away, or conceals, or by fraud, artifice, or deception obtains such information;
(2) without authorization copies, duplicates, sketches, draws, photographs, downloads, uploads, alters, destroys, photocopies, replicates, transmits, delivers, sends, mails, communicates, or conveys such information;
(3) receives, buys, or possesses such information, knowing the same to have been stolen or appropriated, obtained, or converted without authorization;
(4) attempts to commit any offense described in paragraphs (1) through (3); or
(5) conspires with one or more other persons to commit any offense described in paragraphs (1) through (3), and one or more of such persons do any act to effect the object of the conspiracy, shall, except as provided in subsection (b), be fined under this title or imprisoned not more than 10 years, or both.
(b) Any organization that commits any offense described in subsection (a) shall be fined not more than $5,000,000.
PRATSA has some key distinctions from PATSIA:
(1) it does not require a complaint describing in specificity reasonable secrecy measures or a declaration regarding the substantial need for nationwide service of process or misappropriation of trade secrets from the United States to another country;
(2) it does not provide for civil ex parte seizure orders;
(3) the statute of limitations is two years, not three;
(4) it provides for a more narrow civil claim by just providing a claim for a violation of Section 1832 rather than a violation of Section 1831 or a stand-alone misappropriation claim (e.g. a misappropriation of a trade secret that is related to or included in a product that is produced for or placed in interstate or foreign commerce); and
(5) it does not provide for a comprehensive list of remedies such as exemplary damages or attorneys’ fees.
These deviations may help PRATSA where PATSIA struggled as some members of the legal community contested some of PATSIA’s provisions, including the definition of nationwide service of process and the scope and procedures regarding ex parte seizure orders.
It is important to recognize that by amending the EEA, PRATSA may inherently lead to conflicts with state trade secret laws. In particular, Section 1838 provides that the EEA “shall not be construed to preempt or displace any other remedies, whether civil or criminal, provided by United States Federal, State, commonwealth, possession, or territory law for the misappropriation of a trade secret….” Thus, a trade secret holder could potential bring claims under both their state’s respective trade secret laws and the EEA.
One benefit of PRATSA is that it attempts to resolve a deficiency under the current EEA. Specifically, PRATSA expressly exempts “reverse engineering” from violation of Section 1832. While the legislative history of the EEA suggests that traditional defenses available in a civil action for theft of trade secrets are equally applicable to a criminal violation, the EEA’s lack of specific language providing for a reverse engineering defense has troubled some commentators because the statute arguably implicates certain reverse engineering activities previously thought to be lawful. Regardless of its amendment for a private civil claim, PRATSA’s reverse engineering exemption will provide clarity to the existing statute.
Finally, one important implication of providing a private civil claim under the EEA is the extraterritoriality provision in Section 1837, which provides that the EEA also applies to conduct occurring outside the United States if the offender is a (a) citizen or permanent resident alien of U.S., or (b) organization organized under U.S. law. This may strengthen companies’ abilities to protect against trade secrets theft to or for foreign individuals, companies or governments provided either of these above requirements are satisified. In the criminal context, however, prosecutors have recently struggled in effectuating service of process over foreign companies under the Federal Criminal Rules of Procedure. Accordingly, additional modifications may be needed to this proposed legislation to ensure that it adequately addresses the threat posed to U.S. companies by foreign trade secret theft.
After a first reading of the proposed bill and recognizing it is likely a work in progress, we like PRATSA, particularly if it is modified to include Section 1831 claims in addition to Section 1832 claims (as well as possibly a stand-alone misappropriation claim), appropriate remedies (e.g. exemplary damages and attorneys’ fees), and it more adequately addresses trade secret theft by foreign actors. Its simple approach may contribute to its success. It left alone a lot of the hotly debated provisions from PATSIA upon which many legal commentators were unable to reach an agreement. Yet, PRATSA’s true value lies in its potential to provide a private civil claim for trade secret theft in federal court which may have certain advantages over state court, such as the ability to obtain discovery through the federal subpoena power and the potential to more adequately address trade secret theft by foreign individuals, companies, or governments.