There’s no doubt that protection of trade secrets is a major concern for most businesses operating in today’s global economy. As we have previously discussed, a few years ago CREATe.org and PwC US released a report that highlighted how far-reaching and deeply challenging trade secret theft is for companies operating on a global scale. Notably, in their report, CREATe.org and PwC estimated that trade secrets theft costs anywhere between 1-3% of the GDP of the United States and other industrial economies.
To address the threat to the trade secrets of US businesses, earlier this year Senators Orrin Hatch (R-UT) and Christopher Coons (D-DE) introduced the “Defend Trade Secrets Act of 2015” (S. 1890) in the United States Senate, while Rep. Doug Collins (R-GA) introduced an identical version of the same bill (H.R. 3326) in the United States House of Representatives. As we discussed here, if enacted, the Defend Trade Secrets Act would provide a civil cause of action in federal court to private litigants for “misappropriation of a trade secret that is related to a product or service used in, or intended for use in, interstate or foreign commerce.” In addition, the bill seeks to (1) create a uniform standard for trade secret misappropriation by expanding the Economic Espionage Act; (2) provide parties pathways to injunctive relief and monetary damages to preserve evidence, prevent disclosure, and account for economic harm to companies; and (3) create remedies for trade secret misappropriation similar to those in place for other forms of intellectual property.
Both bills have garnered widespread bipartisan support and are currently pending review by the Judiciary Committees in each chamber. As of publication of this blog post, the Senate bill has 10 cosponsors (6 Republicans, 4 Democrats), while the House bill has 62 cosponsors (42 Republicans, 20 Democrats). Given the bi-partisan and bi-cameral nature of the bills, many commentators have predicted that the Defend Trade Secrets Act of 2015 stands a very strong chance of becoming law. Nevertheless, given the current status of the bills in committee, it is unlikely that either bill be scheduled for a floor vote by the end of the year. Staff on Capitol Hill report that, while the House’s bill’s sponsors hope to see committee action by Christmas, the Chairman of the House Judiciary Committee has only committed to moving the legislation, not to a specific time frame. The Senate bill likewise currently has no scheduled date for Judiciary Committee action.
Meanwhile, across the Atlantic, the European Commission’s proposed Directive to protect trade secrets has now crossed most procedural hurdles necessary for a first reading in the European Parliament. As we discussed here, the proposed Directive (if enacted) would substantially alter the legal landscape in Europe regarding trade secret protection and would require all member states to provide certain minimum standards of legal protection for trade secrets. Earlier this year, the European Parliament’s Committee on the Internal Market and Consumer Protection and Committee on Industry, Research and Energy both reviewed the proposed Directive and published their comments and recommended amendments to the proposal. The Parliament’s Committee on Legal Affairs subsequently published its own report, which includes the other committees’ reports and a draft resolution for vote by the European Parliament.
In its draft resolution, the Committee on Legal Affairs accepted some of the amendments proposed by other committees, particularly amendments to address concerns that the proposed Directive could have an anti-competitive impact or could be used to chill free expression. Among other proposed amendments, the Committee on Legal Affairs has made the following amendments:
- Adding language to clarify that the Directive “does not provide any ground to trade secret holders to limit the use of experience and skills honestly acquired by employees in the normal course of their employment or to add any restriction for employees to occupy a new position, to those provided for in their employment contract, in compliance with relevant Union and national law;”
- Adding language to emphasize the importance of trade secrets protection for small and medium-sized enterprises (“SMEs”);
- Adding language to clarify that the measures and remedies provided under the Directive should not restrict whistleblowing activity and the safeguard the freedom of the press;
- Changing the statute of limitations for trade secrets misappropriation claims to three years (the Commission’s original text proposed a limitations period of “at least one year but not more than two year after the applicant became aware, or had reason to become aware, of the last fact giving rise to the action”);
- Amending the Directive’s remedies for protection of trade secrets during litigation to ensure that “those restrictions should not be such as to prevent at least one person from each of the parties and their respective legal representatives from having full access to all the documents in the file” ( in contrast, the Commission’s original text was written broadly enough to permit “Attorneys’ Eyes’ Only” protective orders like those commonly used in litigation in the U.S.).
With the publication of a draft resolution, the proposed directive now awaits a vote in the European Parliament upon the conclusion of additional negotiations between the Parliament and the Council of the European Union (which has already reached an agreement on a general approach for establishing a new legal framework for the protection of trade secrets). Staff of the European Commission in Brussels have reported to us that the Council and the Parliament are attempting to reach an agreement that would permit adoption of the proposed directive on a first reading in the Parliament. Currently, the European Parliament is expected to vote on the initiative around March 2016, but the precise date for a first reading has yet to be determined.
We will continue to track developments on both sides of the Atlantic as these proposed measures continue to be considered in the U.S. Congress and in the European Parliament.
Dan Hart is a Partner at Seyfarth Shaw’s Atlanta office and will be presenting “Protection of Trade Secrets in the US, EU, and Other Countries” at the International Technology Law Association’s 2015 European Conference, which will be held in London from November 4-6. More information about the conference can be found here.