H. Rept. 114-529 - DEFEND TRADE SECRETS ACT OF 2016114th Congress (2015-2016)
Committee Report
Reports for S.1890
H. Rept. 114-529 - 114th Congress (2015-2016)
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House Report 114-529 - DEFEND TRADE SECRETS ACT OF 2016
[House Report 114-529]
[From the U.S. Government Publishing Office]
114th Congress } { Report
HOUSE OF REPRESENTATIVES
2d Session } { 114-529
======================================================================
DEFEND TRADE SECRETS ACT OF 2016
_______
April 26, 2016.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Goodlatte, from the Committee on the Judiciary, submitted the
following
R E P O R T
[To accompany S. 1890]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (S. 1890) to amend chapter 90 of title 18, United States
Code, to provide Federal jurisdiction for the theft of trade
secrets, and for other purposes, having considered the same,
reports favorably thereon without amendment and recommends that
the bill do pass.
CONTENTS
Page
Purpose and Summary.............................................. 1
Background and Need for the Legislation.......................... 2
Hearings......................................................... 6
Committee Consideration.......................................... 6
Committee Votes.................................................. 6
Committee Oversight Findings..................................... 6
New Budget Authority and Tax Expenditures........................ 7
Congressional Budget Office Cost Estimate........................ 7
Duplication of Federal Programs.................................. 8
Disclosure of Directed Rule Makings.............................. 9
Performance Goals and Objectives................................. 9
Advisory on Earmarks............................................. 9
Section-by-Section Analysis...................................... 9
Agency Views..................................................... 17
Changes in Existing Law Made by the Bill, as Reported............ 18
Purpose and Summary
S. 1890 amends the Economic Espionage Act of 1996 to
provide a Federal civil remedy for the misappropriation of
trade secrets, allowing trade secret owners to protect their
innovations by seeking redress in Federal court, just as owners
of other forms of intellectual property, including copyrights,
patents, and trademarks, can seek remedies in Federal court for
violations of their rights. The bill provides for equitable
remedies and the award of damages for the misappropriation of a
trade secret, and models its definition of ``misappropriation''
on the Uniform Trade Secrets Act. It also provides for
expedited relief on an ex parte basis in the form of seizure of
property from the party accused of misappropriation only if
necessary to preserve evidence or prevent the dissemination of
a trade secret. Any ex parte seizure order issued by a court
must minimize any interruption to the business operations of
third parties, protect the property seized from disclosure, and
set a hearing date at the earliest possible time. The bill also
provides sanctions for an erroneous seizure.
Background and Need for the Legislation
Trade secrets, under U.S. law, consist of three parts: (1)
information that is non-public; (2) the reasonable measures
taken to protect that information; and (3) the fact that the
information derives independent economic value from not being
publicly known. This confidential business information can be
protected for an unlimited time, unlike patents, and requires
no formal registration process. But unlike patents, once this
information is disclosed it instantly loses its value and the
property right itself ceases to exist.
So there is a definite trade-off between securing patent
protection or keeping an innovation as a trade secret. By
seeking patent protection, an inventor agrees to disclose to
the world their invention and how it works, furthering
innovation and research. They also secure a 20 year exclusive
term of protection, and the right to prevent others from
making, using, selling, importing, or distributing a patented
invention without permission. By maintaining it as a trade
secret, an inventor could theoretically keep their invention
secret indefinitely (ex: formula for Coca-Cola;\1\ the KFC
Colonel's Secret Recipe\2\). But the downside is there is no
protection if the trade secret is uncovered by others through
reverse engineering or independent development.
---------------------------------------------------------------------------
\1\http://www.coca-colacompany.com/press-center/press-releases/
coca-cola-moves-its-secret-
formula-to-the-world-of-coca-cola/--``It hasn't been moved in 86 years,
but today the secret is out--The Coca-Cola Company has moved the 125-
year-old secret formula for Coca-Cola to a new home at the World of
Coca-Cola in Atlanta.''
\2\https://www.kfc.com/menu/chicken/original-recipe--``Still
freshly prepared in every restaurant, the Colonel's Original Recipe
chicken is seasoned with our secret blend of 11 herbs & spices and then
hand breaded all day long by a certified cook.''
---------------------------------------------------------------------------
Trade secrets are the commercially valuable designs,
processes, techniques and other forms of information kept
confidential by companies because, by virtue of their secrecy,
they give companies an edge in a competitive marketplace. Often
developed at great cost and through years of research and
development. In a global economy based on knowledge and
innovation, trade secrets constitute some of any company's most
valuable property.
Examples of trade secrets include confidential formulas,
manufacturing techniques, and customer lists. Trade secret law
offers protection from trade secret ``misappropriation,'' which
is the unauthorized acquisition, use, or disclosure of such
secrets obtained by some improper means. But discovery of a
trade secret by fair, lawful methods, such as reverse
engineering or independent development, is permitted.
Though states are allowed to develop their own trade
secrets laws, most states have adopted the Uniform Trade
Secrets Act (UTSA) as the basis for their trade secret laws.
The Federal Government currently protects trade secrets through
both the criminal and public civil enforcement sections of the
Economic Espionage Act of 1996 (``EEA''), which is codified in
18 U.S.C. Sec. Sec. 1831-39. Under section 1831, which deals
with economic espionage, it is a felony to knowingly steal or
misappropriate a trade secret to ``benefit any foreign
government, foreign instrumentality, or foreign agent.''
Section 1832 addresses the theft of trade secrets ``related to
or included in a product that is produced or placed in
interstate or foreign commerce.'' It makes it a crime to
knowingly steal or misappropriate a trade secret ``to the
economic benefit of anyone other than the owner thereof'' if
the accused party ``intend[s] or know[s] that the offense will
. . . injure any owner of that trade secret.''
The trade secrets of American companies are increasingly at
risk for misappropriation by thieves looking for a quick payday
or to replicate the market-leading innovations developed by
trade secret owners. Using ever-more sophisticated means of
attack, these thieves aim to steal the know-how that has made
American industry the envy of the world. The Commission on the
Theft of American Intellectual Property found that the illegal
theft of intellectual property is undermining the means and
incentive for entrepreneurs to innovate, slowing the
development of new inventions and industries that could raise
the prosperity and quality of life for everyone.\3\
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\3\Report of the Commission of the Theft of American Intellectual
Property, at 1, 10 (May 2013), available at http://
www.ipcommission.org/report/IP_Commission_Report_052213.pdf.
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The threat is significant: Trade secrets are an integral
part of a company's competitive advantage in today's economy,
and with the increased digitization of critical data and
increased global trade, this information is highly susceptible
to theft.\4\ The United States Department of Defense has found
that every year, ``an amount of intellectual property larger
than that contained in the Library of Congress is stolen from
networks maintained by U.S. businesses, universities, and
government departments and agencies.''\5\ General Keith
Alexander, former head of the National Security Agency and U.S.
Cyber Command, estimated that U.S. companies lose $250 billion
per year due to the theft of their intellectual property.\6\
More recently, the Center for Responsible Enterprise and Trade,
along with PwC, issued a report estimating that trade secret
theft exacts a cost on U.S. companies of between one and 3
percent of GDP annually, roughly a cost of between $160 and
$480 million each year.\7\ And in the 112th Congress, this
Committee recognized the ``significant and growing threat
presented by criminals who engage in espionage on behalf of
foreign adversaries and competitors.''\8\
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\4\See Trade Secrets: Promoting and Protecting American Innovation,
Competitiveness and Market Access in Foreign Markets: Hearing Before
the Subcomm. on Courts, Intellectual Property, and the Internet of the
H. Comm. on the Judiciary, 113th Cong (2014), Statement of Richard
Hertling, Of Counsel, Covington & Burling LLP, at *2; see also id,
Statement of Chris Moore, Senior Director, International Business
Policy, National Association of Manufacturers, at 2; Statement of David
M. Simon, Senior Vice President for Intellectual Property,
salesforce.com, Inc., at *2-3; Statement of Thaddeus Burns, Senior
Counsel, Intellectual Property & Trade, General Electric, on behalf of
Intellectual Property Owners Association, at *2. Because the record of
the June 24, 2014 hearing has not been published as of the publication
of this report, citations to the testimony in that record are to the
material submitted, rather than to the pages of the GPO print, and are
identified by asterisks.
\5\Dep't of Defense, Strategy for Operating in Cyberspace, at 4
(July 2011), available at http://www.defense.gov/news/
d20110714cyber.pdf.
\6\Josh Rogin, NSA Chief: Cybercrime Constitutes the ``Greatest
Transfer of Wealth in History,'' The Cable, July 9, 2012, available at
http://thecable.foreignpolicy.com/posts/2012/07/09/
nsa_chief_cybercrime_constitutes_the_greatest_transfer_of_wealth_in_hist
ory.
\7\Center for Responsible Enterprise and Trade & PwC, Economic
Impact of Trade Secret Theft: a Framework for Companies to Safeguard
Trade Secrets and Mitigate Potential Threats, at 7-9 (February 2014),
available at https://create.org/wp-content/uploads/2-14/07/CREATe.org-
PwC-Trade-Secret-Theft-FINAL-Feb-2014_01.pdf.
\8\H.R. Rep. No. 112-610, Foreign and Economic Espionage Penalty
Enhancement Act of 2012, at 1 (2012).
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Companies have taken a number of measures to combat this
threat, including strengthening their cybersecurity measures,
encrypting key documents, examining their supply chains for
weak points, employing strong contractual protections to
safeguard their trade secrets in business relationships, and
increasing the physical security of their plants and offices.
When thefts do occur, companies turn to either state civil
laws, which vary by jurisdiction, or the Federal Economic
Espionage Act (``EEA'').\9\
---------------------------------------------------------------------------
\9\Economic Espionage Act of 1996, Pub. L. No. 104-294, 110 Stat.
3488 (1996).
---------------------------------------------------------------------------
The EEA, enacted in 1996 and codified at 18 U.S.C.
Sec. Sec. 1831 et seq., makes it a Federal criminal offense to
misappropriate a trade secret that has an interstate or foreign
nexus. This Committee's Report on the EEA found that trade
secrets form ``an integral part of America's economic well-
being.''\10\ As the first Federal statute to protect trade
secrets, the EEA has enabled the FBI to investigate cases of
trade secret theft, including, for example, the case of a
former engineer at Ford Motor Co. who stole 4,000 documents and
went to work at a competitor, causing losses to Ford estimated
at $50 million. However, the FBI does not have the resources to
investigate every case of trade secret theft. And the EEA, as a
criminal statute, is not suited to making whole the victims of
misappropriation.
---------------------------------------------------------------------------
\10\H.R. Rep. No. 104-788, Economic Espionage Act of 1996, at 4
(1996)
---------------------------------------------------------------------------
Companies facing a trade secret theft also turn to state
trade secret laws, many of them based on the Uniform Trade
Secrets Act (``UTSA''). While 48 states have adopted variations
of the UTSA, the state laws vary in a number of ways and
contain built-in limitations that make them not wholly
effective in a national and global economy. First, they require
companies to tailor costly compliance plans to meet each
individual state's law. Second, trade secret theft today is
often not confined to a single state. The theft increasingly
involves the movement of secrets across state lines, making it
difficult for state courts to efficiently order discovery and
service of process. Finally, trade secret cases often require
swift action by courts across state lines to preserve evidence
and keep a trade secret thief from boarding a plane and taking
the secret beyond the reach of American law. In a globalized
and national economy, Federal courts are better situated to
address these concerns.
In the 112th Congress the Judiciary Committee helped enact
two pieces of legislation to improve the protection of trade
secrets.
LPublic Law 112-236--The Theft of Trade
Secrets Clarification Act of 2012 (S. 3642), closed a
loophole in the Economic Espionage Act that had allowed
the theft of valuable trade secret source code.\10\
This legislation was introduced in response to the
Second Circuit decision in United States v. Aleynikov,
676 F.3d 71 (2d Cir. 2012), which overturned a verdict
that found that the defendant violated 18 U.S.C.
Sec. 1832(a) by stealing proprietary computer code, a
trade secret, from his employer.
LPublic Law 112-269--The Foreign and Economic
Espionage Penalty Enhancement Act of 2012 (H.R. 6029/S.
678), bolstered criminal penalties for economic
espionage and directed the Sentencing Commission to
consider increasing offense levels for trade secret
crimes. Its passage is an important step in ensuring
that penalties are commensurate with the economic harm
inflicted on trade secret owners.
In the 113th Congress, multiple bills were introduced in
the House and Senate pertaining to trade secret
misappropriation. The 114th Congress has seen the
reintroduction and Senate-passage of S. 1890, the Defend Trade
Secrets Act.
In 2014, a House bill (H.R.5233, the ``Trade Secrets
Protection Act'') introduced by Rep. Holding and Rep. Nadler
and 16 other cosponsors, 13 of whom were Judiciary Committee
members, amended the Economic Espionage Act of 1996 to create a
Federal civil remedy for trade secret misappropriation. That
bill passed out of committee on September 10, 2014. In 2015,
the House introduced a bill (H.R. 3326, the ``Defend Trade
Secrets Act of 2015'') similar to the one that previously
passed out of Committee. The Senate introduced a companion
bill, the ``Defend Trade Secrets Act of 2015'' (S. 1890), which
the Senate Judiciary Committee considered on January 28, 2016.
The Senate passed this bill by a vote of 87-0 on April 4, 2016.
The House Judiciary Committee marked up and passed the Senate-
passed bill, S. 1890, on April 20, 2016.
The Act's definition of misappropriation is modeled on the
Uniform Trade Secrets Act, versions of which have been adopted
by 48 states. The Act does not pre-empt these state laws and
offers a complementary Federal remedy if the jurisdictional
threshold for Federal jurisdiction is satisfied. The Act
defines misappropriation as acquisition of a trade secret by
improper means, disclosure or use of a trade secret by a person
who had reason to know that the trade secret was acquired by
improper means or under circumstances giving rise to a duty of
secrecy, or disclosure or use of a trade secret by a person who
had reason to know it was disclosed by accident or mistake.
The Act also provides for equitable remedies and the award
of damages, and for double damages for a willful and malicious
misappropriation, and has a 3-year statute of limitations.
The Act also provides for the ex parte seizure of property
from the party accused of misappropriation if necessary to
preserve evidence or prevent the dissemination of a trade
secret. The applicant for the seizure order must show it is
likely to succeed in showing that the party receiving the order
misappropriated the trade secret and would not comply with an
injunction, that irreparable injury would occur in the absence
of a seizure, and that the harm to the applicant outweighs the
legitimate interests of the party receiving the order. The
order must minimize any interruption to the business operations
of third parties, protect the seized property from disclosure,
and set a hearing date at the earliest possible time and not
later than 7 days after the order has issued.
America's strength has always been found in the innovation
and ingenuity of its people--its inventors, creators,
engineers, designers, developers, and doers. American
businesses that compete globally will lose their competitive
edge if they cannot quickly pursue and stop thieves looking to
shortcut the innovative products, designs, and processes that
have fueled our economy. This bill will equip companies with
the additional tools they need to protect their proprietary
information, to preserve and increase jobs and promote growth
in the United States, and to continue to lead the world in
creating new and innovative products, technologies, and
services.
The Defend Trade Secrets Act of 2016 (S. 1890) offers a
needed update to Federal law to provide a Federal civil remedy
for trade secret misappropriation. Carefully balanced to ensure
an effective and efficient remedy for trade secret owners whose
intellectual property has been stolen, the legislation is
designed to avoid disruption of legitimate businesses, without
preempting State law. This narrowly drawn legislation will
provide a single, national standard for trade secret
misappropriation with clear rules and predictability for
everyone involved. Victims will be able to move quickly to
Federal court, with certainty of the rules, standards, and
practices to stop trade secrets from winding up being
disseminated and losing their value. As trade secret owners
increasingly face threats from both at home and abroad, the
bill equips them with the tools they need to effectively
protect their intellectual property and ensures continued
growth and innovation in the American economy.
Hearings
The Committee on the Judiciary did not hold a legislative
hearing on S. 1890. The Committee held an oversight hearing on
``Trade Secrets: Promoting and Protecting American Innovation,
Competitiveness and Market Access in Foreign Markets'' on June
24, 2014. The Committee heard testimony from Mr. Thaddeus
Burns, Senior Counsel, Intellectual Property & Trade, General
Electric; Mr. Richard A. Hertling, Of Counsel, Covington &
Burling LLP, on behalf of the Protect Trade Secrets Coalition;
Mr. Christopher Moore, Senior Director, International Business
Policy, National Association of Manufacturers; and Mr. David
Simon, Senior Vice President, Intellectual Property,
Salesforce.com.
Committee Consideration
On April 20, 2016, the Committee met in open session and
ordered the bill S. 1890 favorably reported, without amendment,
by voice vote, a quorum being present.
Committee Votes
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee advises that there
were no recorded votes during the Committee's consideration of
S. 1890.
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee advises that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of rule XIII of the Rules of the House of
Representatives is inapplicable because this legislation does
not provide new budgetary authority or increased tax
expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, S. 1890, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, April 26, 2016.
Hon. Bob Goodlatte, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 1890, the ``Defend
Trade Secrets Act of 2016.''
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Marin
Burnett, who can be reached at 226-2860.
Sincerely,
Keith Hall,
Director.
Enclosure
cc:
Honorable John Conyers, Jr.
Ranking Member
S. 1890--Defend Trade Secrets Act of 2016.
As ordered reported by the House Committee on the Judiciary
on April 20, 2016.
S. 1890 would establish a Federal remedy for individuals
seeking relief from the misappropriation of trade secrets.
Under the bill, an owner of a trade secret could file a civil
action in a district court and the court could issue an order
to seize any property necessary to preserve evidence for the
civil action. The legislation would require information
gathered or stored during a legal proceeding related to trade
secrets to be secured to protect its confidentiality. The bill
also would increase the fines that may be collected in the
event of the theft of a trade secret. Finally, the legislation
would require the Department of Justice (DOJ) and the Federal
Judicial Center to submit periodic reports concerning the theft
of trade secrets in the United States.
Based on information from DOJ and the Administrative Office
of the U.S. Courts, CBO estimates that implementing S. 1890
would have no significant effect on the Federal budget. Because
enacting S. 1890 would affect direct spending and revenues,
pay-as-you-go procedures apply. Specifically, the bill would
affect the collection of fees for civil court filings and
potentially increase certain fines, which are recorded in the
budget as revenues. A portion of those revenues would be spent
without further appropriation. On net, CBO estimates that the
budgetary effect of those provisions would be negligible for
each year and over the 2016-2026 period.
CBO estimates that enacting S. 1890 would not increase net
direct spending or on-budget deficits in any of the four
consecutive 10-year periods beginning in 2027.
S. 1890 would preempt State laws that govern matters of
individual liability when trade secrets are disclosed to
governmental officials during the course of an investigation or
legal proceeding. That preemption would be a mandate as defined
in the Unfunded Mandate Reform Act (UMRA) because it would
limit the authority of States to apply their own laws. However,
CBO estimates that the preemption would not affect the budgets
of State, local, or tribal governments because it would impose
no duty on States that would result in additional spending or
loss of revenue.
S. 1890 would impose a private-sector mandate as defined in
UMRA by extending civil and criminal liability protection to
individuals who disclose trade secrets to government
authorities during the course of an investigation or legal
proceeding. By providing such liability protection, the bill
would prevent entities from seeking compensation for damages
from those individuals under trade secret laws. The cost of the
mandate would be the forgone value of judgements and
compensation for damages for such disclosures that entities
would be awarded under a trade secrets claim. The available
literature suggests that few of those types of lawsuits have
been brought against individuals under current law.
Consequently, CBO estimates that the cost of the mandate would
probably fall below the annual threshold established in UMRA
for private-sector mandates ($154 million in 2016, adjusted
annually for inflation).
On February 25, 2016, CBO transmitted a cost estimate for
S. 1890 as ordered reported by the Senate Judiciary Committee
on January 28, 2016. The two versions of the legislation are
identical and CBO's cost estimates are the same.
The CBO staff contacts for this estimate are Marin Burnett
(for Federal costs), Rachel Austin (for intergovernmental
mandates), and Logan Smith (for private-sector mandates). The
estimate was approved by Theresa A. Gullo, Assistant Director
for Budget Analysis.
Duplication of Federal Programs
No provision of S. 1890 establishes or reauthorizes a
program of the Federal Government known to be duplicative of
another Federal program, a program that was included in any
report from the Government Accountability Office to Congress
pursuant to section 21 of Public Law 111-139, or a program
related to a program identified in the most recent Catalog of
Federal Domestic Assistance.
Disclosure of Directed Rule Makings
The Committee estimates that S. 1890 specifically directs
to be completed no specific rule makings within the meaning of
5 U.S.C. Sec. 551.
Performance Goals and Objectives
The Committee states that pursuant to clause 3(c)(4) of
rule XIII of the Rules of the House of Representatives, S. 1890
will provide for civil jurisdiction in Federal court for the
misappropriation of a trade secret, providing companies with an
essential tool to prevent the disclosure of their valuable
trade secrets and to obtain equitable remedies and damages in
the event of trade secret theft.
Advisory on Earmarks
In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives, S. 1890 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(e), 9(f), or 9(g) of Rule XXI.
Section-by-Section Analysis
Section 1. Short Title.
Section 1 provides that the short title of S. 1890 is the
``Defend Trade Secrets Act of 2016.''
Sec. 2. Federal Jurisdiction for Theft of Trade Secrets.
Section 2(a) amends Sec. 1836 of title 18 by striking
subsection (b), which provides that the Federal district courts
have exclusive jurisdiction over civil actions brought by the
Attorney General for trade secret misappropriation. In its
place, the new provision creates a Federal civil remedy for
private parties for trade secret misappropriation.
In General.
The new Sec. 1836(b) in paragraph (1) authorizes the owner
of a trade secret that is misappropriated to bring a civil
action in Federal court if the trade secret is related to a
product or service used in, or intended for use in, interstate
or foreign commerce. This jurisdictional nexus to interstate or
foreign commerce is identical to the existing language required
for Federal jurisdiction over the criminal theft of a trade
secret under Sec. 1832(a).
Civil Seizure.
The new Sec. 1836(b) authorizes a Federal court to issue an
order, in extraordinary circumstances and upon an ex parte
application based on an affidavit or verified complaint, to
provide for seizure of property necessary to preserve evidence
or to prevent the propagation or dissemination of the trade
secret. Ex parte seizures will issue only when the
prerequisites for the issuance of a seizure order are present.
The issuance of a seizure order is limited to ``extraordinary
circumstances.'' Subparagraph (A)(ii) lists requirements for
issuing a seizure order. For example, this authority is not
available if an injunction under existing rules of civil
procedure would be sufficient. The ex parte seizure provision
is expected to be used in instances in which a defendant is
seeking to flee the country or planning to disclose the trade
secret to a third party immediately or is otherwise not
amenable to the enforcement of the court's orders.
Subparagraph (A)(ii) contains numerous limitations,
described below, and is not intended to affect the authority of
the Federal courts to provide equitable relief and issue
appropriate orders pursuant to Rule 65 of the Federal Rules of
Civil Procedure, the All Writs Act (28 U.S.C. Sec. 1651), or
any other authority, including the court's inherent authority.
Subparagraph (A)(ii) of Sec. 1836(b) specifies that that a
court may not grant a seizure order unless it finds that it
clearly appears from specific facts that (1) a temporary
restraining order issued pursuant to Federal Rule of Civil
Procedure 65(b) would be inadequate because the party to which
the order would be issued would evade, avoid, or otherwise not
comply with it; (2) immediate and irreparable injury will occur
if the seizure is not ordered; (3) the harm to the applicant of
denying the application outweighs the harm to the legitimate
interests of the person against whom the seizure is ordered and
substantially outweighs the harm to any third parties; (4) the
applicant is likely to succeed in showing that the person
against whom the seizure is ordered misappropriated the trade
secret by improper means, or conspired to misappropriate the
trade secret by improper means, and is in actual possession of
it and any property to be seized; (5) the applicant describes
with reasonable particularity the matter to be seized and, to
the extent reasonable, identifies the location where the matter
is to be seized; (6) the person against whom the seizure would
be ordered, or those working in concert with that person, would
destroy, move, hide, or otherwise make such matter inaccessible
if the applicant were to provide that person notice; and (7)
the applicant has not publicized the requested seizure.
Before granting an ex parte seizure order, it is the
Committee's expectation that courts will require applicants to
describe the trade secret that would be the subject of the
order with sufficient particularity so that the court may
evaluate the request. The requirement of actual possession
contained in clause (V) serves to protect third-parties from
seizure. For instance, the operator of a server on which
another party has stored a misappropriated trade secret, or an
online intermediary such as an Internet service provider, would
not be subject to seizure because their servers, and the data
stored upon them, would not be in the actual possession of the
defendant against whom seizure was ordered. While the court may
not order a seizure against the third party under this
provision, the court may decide to issue a third-party
injunction preventing disclosure of the trade secret using its
existing authority to provide equitable relief. The requirement
relating to improper means is intended to prevent the seizure
provision from being used against a party who may know it is in
possession of a trade secret that was misappropriated, but did
not use, or conspire to use, improper means to acquire such
trade secret.\11\ Seizure of a trade secret that was stolen by
one party and handed off to an accomplice is allowed under the
clause.
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\11\The Act's protections against the misappropriation of trade
secrets--and the remedies it provides against such misappropriation--
are not intended to displace or restrict protections for members of the
press recognized under the First Amendment. The Act should be applied
consistently with the First Amendment and with the Supreme Court's
decision in Bartnicki v. Vopper, 532 U.S. 514 (2001). That case held
that the First Amendment protects members of the press against
liability (including in civil actions) for disclosing information, even
if the information was improperly or illegally obtained by another
party in the first instance, particularly if the information relates to
a matter of public concern. Indeed, Bartnicki recognized that the
Supreme Court ``has repeatedly held that `if a newspaper lawfully
obtains truthful information about a matter of public significance then
state officials may not constitutionally punish publication of the
information, absent a need . . . of the highest order.''' See
Bartnicki, 532 U.S. at 528 (quoting Smith v. Daily Mail Publ'g Co., 443
U.S. 97, 102 (1979)).
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Subparagraph (B) of new Sec. 1836(b)(2) provides that a
seizure order shall (i) set forth findings of fact and
conclusions of law required for the order; (ii) provide for the
narrowest seizure of property necessary to protect the trade
secret, in a manner that minimizes any interruption of the
business operations of third parties and, to the extent
possible, does not interrupt the legitimate business operations
of the person accused of misappropriating the trade secret;
(iii) be accompanied by an order protecting the seized property
from disclosure by prohibiting access by the applicant or the
person against whom the order is directed, and prohibiting any
copies of the seized property, until such parties have an
opportunity to be heard in court (iv) provide guidance to law
enforcement officials executing the seizure that clearly
delineates the scope of their authority, including the hours
during which the seizure may be executed and whether force may
be used to access locked areas; (v) set a date for a hearing at
the earliest possible time, and no later than 7 days after the
order has issued, unless parties involved consent to another
date; and (vi) require the person obtaining the order to
provide the security determined adequate by the court for
payment of damages that person may be entitled to recover as a
result of a wrongful or excessive seizure, or attempted
seizure.
Subparagraph (C) of new Sec. 1836(b)(2) requires a court,
in issuing a seizure order, to take appropriate action to
protect the target of the order from publicity, by or at the
behest of the person obtaining the order, about such order and
any seizure under such order.
Subparagraph (D) states that any materials seized pursuant
to an order shall be taken into the custody of the court, which
shall secure the material from physical and electronic access.
In implementing this subparagraph, unless there is consent from
the parties, the court should be careful to keep any electronic
data or storage media secure and disconnected from any network
or the Internet, thereby increasing security of the materials.
The court shall take appropriate measures to protect the
confidentiality of seized materials that are unrelated to the
trade secret, unless the person against whom the order is
entered consents to the disclosure of the material. The court
may appoint a special master, bound by a nondisclosure
agreement approved by the court, to locate and isolate all
misappropriated trade secret information and facilitate the
return of unrelated property and data to the person from whom
the property was seized.
Subparagraph (E) requires service of the court's order and
the submissions of the applicant on the party against whom the
order is directed. The order must be carried out by a Federal
law enforcement officer. The court may allow State and local
law enforcement officials to participate but may not allow the
applicant or its agents to participate. At the request of law
enforcement, the court may appoint a neutral technical expert,
bound by a nondisclosure agreement, to assist in the seizure if
the court determines that the expert's participation would
minimize the burden of the seizure.
Subparagraph (F) provides that the court shall hold a
hearing at which the party who obtained the order shall have
the burden to prove the facts supporting the findings of fact
and conclusions of law necessary to prove the order. If a party
fails to meet the burden for its proposed seizure, the seizure
order shall be dissolved or modified appropriately. A party
against whom the order has been issued, or any person harmed by
the order, may move the court at any time to dissolve or modify
the order.
Subparagraph (G) provides that a person who suffers damage
by reason of a wrongful or excessive seizure has a cause of
action against the applicant for the order under which the
seizure was made, to recover damages, including punitive
damages, and reasonable attorney's fees.
Subparagraph (H) provides that a party or other person who
claims to have an interest in the subject matter seized may
move to encrypt any seized materials.
Remedies.
Paragraph (3) of new Sec. 1836(b) provides the remedies for
the misappropriation of a trade secret.
Subparagraph (A) specifies the equitable relief available
and is drawn directly from Sec. 2 of the Uniform Trade Secrets
Act (``UTSA''), which forms the basis of trade secrets law in
almost every State. Provided an order does not prevent a person
from entering into an employment relationship or otherwise
conflict with applicable State laws prohibiting restraints on
trade, a court may grant an injunction to prevent any actual or
threatened misappropriation. Any conditions placed by a court
on employment must be based on evidence of threatened
misappropriation, and not merely on information a person
knows.\12\ These limitations on injunctive relief were included
to protect employee mobility, as some have expressed concern
that the injunctive relief authorized under the bill could
override State-law limitations that safeguard employee mobility
and thus could be a substantial departure from existing law in
those states. If determined appropriate, a court may require
affirmative actions to be taken to protect the trade secret,
and, in exceptional circumstances that render an injunction
inequitable, may condition future use of the trade secret upon
payment of a reasonable royalty for no longer than the period
of time for which such use would have been prohibited.
---------------------------------------------------------------------------
\12\The Committee notes that courts interpreting State trade secret
laws have reached different conclusions on the applicability of the
inevitable disclosure doctrine. Compare PepsiCo, Inc. v. Redmond, 54
F.3d 1262, 1269 (7th Cir. 1995) (``[A] plaintiff may prove a claim of
trade secret misappropriation by demonstrating that [the] defendant's
new employment will inevitably lead him to rely on the plaintiff's
trade secrets''), with Whyte v. Schlage Lock Co., 125 Cal. Rptr. 2d
277, 281 (Ct. App. 2002) (rejecting explicitly the inevitable
disclosure doctrine under California law).
---------------------------------------------------------------------------
Section (3)(A)(i)(1)(I) reinforces the importance of
employment mobility and contains some limitations on injunctive
relief that may be ordered. However, if a State's trade secrets
law authorizes additional remedies, those State-law remedies
will still be available. Some courts have found, based on the
information possessed by the employee alone, that an injunction
may issue to enjoin a former employee from working in a job
that would inevitably result in the improper use of trade
secrets. Consistent with the overall intent of the Defense
Trade Secret Act and, in particular, Sec. (2)(f), which
provides that the bill does not ``preempt any other provision
of law,'' the remedies provided in Sec. (3)(A)(i)(1)(I) are
intended to coexist with, and not to preempt, influence, or
modify applicable State law governing when an injunction should
issue in a trade secret misappropriation matter.
Subparagraph (B), drawn directly from Sec. 3 of the UTSA,
specifies the damage award that a court may issue.
Specifically, it authorizes an award of damages for the actual
loss and any unjust enrichment caused by the misappropriation
of the trade secret, or, in lieu of damages measured by any
other method, an award of a reasonable royalty. It is not the
Committee's intent to encourage the use of reasonable royalties
to resolve trade secret misappropriation. Rather, the Committee
prefers other remedies that, first, halt the misappropriator's
use and dissemination of the misappropriated trade secret and,
second, make available appropriate damages.\13\
---------------------------------------------------------------------------
\13\The Committee notes that courts interpreting the UTSA's
analogous provision have held that the award of reasonable royalties is
a remedy of last resort. See e.g., Progressive Prod., Inc. v. Swartz,
258 P.2d 969, 979-80 (Kan. 2011) (citing the comment to Sec. 2 of the
UTSA and explaining that an award of royalties is reserved for
``special situation[s],'' including ``exceptional circumstances'' in
which an overriding public interest makes an injunction untenable).
---------------------------------------------------------------------------
Subparagraph (C) authorizes an award of exemplary damages,
not exceeding twice the compensatory damages awarded, if the
trade secret is willfully and maliciously misappropriated. This
provision is similar to Sec. 3(b) of the UTSA.
Subparagraph (D) allows that attorney's fees may be awarded
to the prevailing party if a claim of misappropriation is made
in bad faith, there is willful and malicious misappropriation,
or a motion to terminate an injunction is made or opposed in
bad faith. This provision is modeled on Sec. 4 of the UTSA.
Jurisdiction.
Subsection (c) of new Sec. 1836 provides that Federal
district courts shall have original jurisdiction of civil
actions brought under the section. This is identical to current
subsection (b).
Period of Limitations.
Subsection (d) of new Sec. 1836 provides a 3-year period of
limitations in which to bring a claim under the section. This
limitations period is now identical to the limitations period
of the UTSA, although a number of States have modified the
limitations period in enacting the UTSA.
Definitions; Rule of Construction; Conforming Amendments.
Section 2(b) of the Act amends Sec. 1839 of title 18 to add
three new definitions.
The intent of Sec. 2(b)(1)(A)--striking ``the public'' and
inserting ``another person who can obtain economic value from
the disclosure or use of the information''--is to bring the
Federal definition of a trade secret in conformity with the
definition used in the Uniform Trade Secrets Act (``UTSA'').
Both the Court of Appeals for the Seventh Circuit, in United
States v. Lange, 312 F.3d 263, 267 (7th Cir. 2002), and the
Court of Appeals for the Third Circuit, in United States v.
Hsu, 155 F.3d 189, 196 (3d Cir. 1998), have identified this
difference between the UTSA and the Federal definition of a
trade secret as potentially meaningful. While other minor
differences between the UTSA and Federal definition of a trade
secret remain, the Committee does not intend for the definition
of a trade secret to be meaningfully different from the scope
of that definition as understood by courts in States that have
adopted the UTSA.
First, ``misappropriation'' is defined identically in all
relevant respects to the definition of misappropriation in
Sec. 1(2) of the UTSA. The Committee intentionally used this
established definition to make clear that this Act is not
intended to alter the balance of current trade secret law or
alter specific court decisions.
Second, the subsection defines ``improper means.'' The
definition contained in subparagraph (A) is identical to the
definition in Sec. 1(1) of the UTSA and includes theft,
bribery, misrepresentation, breach, or inducement of a breach
of a duty to maintain secrecy, or espionage though electronic
or other means. Subparagraph (B) serves to clarify that reverse
engineering and independent derivation of the trade secret do
not constitute improper means.
Third, the subsection defines ``Trademark Act of 1946,''
commonly called the Lanham Act, which provides the basis for
recovery by a party harmed by a wrongful or excessive seizure.
Subsection 2(c) of the Act ensures that nothing in the
legislation is read to create a private right of action for
conduct of a governmental entity or (following the amendment of
18 U.S.C. Sec. 1833 by section 7 of this Act) for disclosing
trade secret information to the Government or in a court filing
in accordance with new 18 U.S.C. Sec. 1833(b).
Subsection 2(d) of the Act is a conforming amendment that
updates the title of Sec. 1836 in the section heading and table
of sections based on the changes made by this Act.
Subsection 2(e) provides that amendments made by section 2
of the Act shall apply to any misappropriation for which any
act occurs on or after the date of enactment of the Act.
Subsection 2(f) of the Act clarifies that nothing in this
Act modifies the rule of construction in Sec. 1838 of title 18,
and, as a result State trade secret laws are not preempted or
affected by this Act. Further, nothing in this Act affects an
otherwise lawful disclosure under the Freedom of Information
Act.
Subsection 2(g) of the Act also specifies that the new
civil remedy created by this Act is not to be construed as a
law pertaining to intellectual property for purposes of any
other Act of Congress.
Sec. 3. Trade Secret Theft Enforcement.
Subsection 3(a) of the Act amends Sec. 1832(b) of title 18
by revising the maximum penalty for a violation under
Sec. 1832(a) to be the greater of $5,000,000 or three times the
value of the stolen trade secret to the organization, including
expenses for research and design and other costs that the
organization has thereby avoided.
Subsection 3(a) also amends Sec. 1835 of title 18 by adding
a new subsection (b), which provides that the court may not
direct the disclosure of any material the owner asserts to be a
trade secret unless the court allows the owner to file a
submission under seal describing the interest of the owner in
keeping the information confidential. The provision or
disclosure of information relating to a trade secret to the
United States or to the court in connection with a prosecution
does not constitute waiver of trade secret protection unless
the owner expressly consents to such waiver. The provision is
also intended to ensure that in a prosecution for conspiracy
related to the alleged theft of a trade secret, the actual
trade secret itself is not subject to disclosure to the
defense, because the actual secrecy of the information that is
the object of the conspiracy is not relevant to the prosecution
of a conspiracy charge.
Subsection 3(b) of the Act amends Sec. 1961(1) of title 18
to include sections 1831 and 1832 relating to economic
espionage and theft of trade secrets as predicate offenses for
the Racketeer Influenced and Corrupt Organizations (RICO) Act.
Sec. 4. Report on Theft of Trade Secrets Occurring Abroad.
Section 4 of the Act requires, not later than 1 year after
the date of enactment of this act and biannually thereafter, a
report by the Attorney General, in consultation with the
Intellectual Property Enforcement Coordinator, the Director of
the United States Patent and Trademark Office, and the heads of
other appropriate agencies, to the Committees on the Judiciary
of the Senate and the House of Representatives, on:
(1) the scope and breadth of trade secret theft from United
States companies occurring outside the United States;
(2) the extent to which trade secret theft occurring
outside of the United States is sponsored by foreign
governments, agents, or instrumentalities;
(3) the threat posed by trade secret theft occurring
outside of the United States;
(4) the ability and limitations of trade secret owners to
prevent the trade secret misappropriation of trade secrets
outside of the United States, to enforce judgment against
foreign entities for such theft, and to prevent imports based
on theft of trade secrets overseas;
(5) the trade secret protections afforded United States
companies by each country that is a trading partner of the
United States and specific information about enforcement
efforts available and undertaken in each such country,
including a list of specific countries where trade secret theft
is a significant problem for United States companies;
(6) instances of the Federal Government working with
foreign countries to investigate, arrest, and prosecute
entities and individuals involved in the theft of trade secrets
outside of the United States;
(7) specific progress made under trade agreements and
treaties, including any new remedies enacted by foreign
countries, to protect United States companies from trade secret
theft outside the United States; and
(8) recommendations for legislative and executive branch
actions that may be undertaken to (A) reduce the threat of and
economic impact caused by the theft of the trade secrets of
United States companies occurring outside of the United States;
(B) educate United States companies regarding threats to their
trade secrets when taken outside of the United States; (C)
provide assistance to United States companies to reduce the
risk of loss of their trade secrets when taken outside of the
United States; and (D) provide a mechanism for United States
companies to confidentially or anonymously report the theft of
trade secrets occurring outside the United States.
Sec. 5. Sense of Congress.
Section 5 of the Act provides that it is the sense of
Congress that trade secret theft occurs domestically and around
the world, and that it is harmful to United States companies
that own and depend on trade secrets. The Economic Espionage
Act of 1996 protects trade secrets from theft under the
criminal law. In enacting a civil remedy, it is important when
seizing information to balance the need to prevent or remedy
misappropriation with the need to avoid interrupting the
legitimate interests of the party against whom a seizure is
issued, and the business of third parties.
Sec. 6. Best Practices.
Section 6 directs the Federal Judicial Center to develop
recommended best practices for seizure, storage, and security
of information under this Act, within 2 years of the enactment.
A copy of the recommendations and any updates made shall be
provided to the Committees on the Judiciary of the Senate and
the House of Representatives.
Sec. 7. Immunity from Liability for Confidential Disclosure of a Trade
Secret to the Government or in a Court Filing.
Section 7 of the Act amends Sec. 1833 of title 18 by adding
a new subsection (b). The new Sec. 1833(b)(1) provides for
criminal and civil immunity for anyone who discloses a trade
secret under two circumstances. Subparagraph (A) addresses
disclosures in confidence to a Federal, State, or local
government official, or to an attorney, for the purpose of
reporting or investigating a suspected violation of the law.
Subparagraph (B) applies to disclosure in a complaint or other
document filed under seal in a judicial proceeding. The
Committee stresses that this provision immunizes the act of
disclosure in the limited circumstances set forth in the
provision itself; it does not immunizes acts that are otherwise
prohibited by law, such as the unlawful access of material by
unauthorized means.
Section 1833(b)(2) created by this Act provides that an
individual who files a lawsuit against an employer for
retaliation for reporting a suspected violation of the law may
disclose a trade secret to an attorney for use in the
proceeding, provided the individual files any document
containing the trade secret under seal and does not disclose
the trade secret other than pursuant to a court order.
Section 1833(b)(3) requires notice of the immunity in this
subsection to be set forth in any employment contract that
governs the use of trade secrets, although an employer may
choose to provide such notice by reference to a policy document
setting forth the employer's reporting policy for a suspected
violation of the law that provides notice of the immunity. An
employer may not be awarded exemplary damages or attorney's
fees under this Act against an employee to whom such notice was
not provided. The notice requirements apply to contracts
entered into or updated after the date of enactment of this
subsection.
Section 1833(b)(4) defines the term ``employee'' to include
any individual performing work as a contractor or consultant.
Section 1833(b)(5) is a conforming amendment to update
Sec. 1838 of title 18 in the section heading and table of
sections based on the changes made by this Act.
Agency Views
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
__________
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, and existing law in which no
change is proposed is shown in roman):
TITLE 18, UNITED STATES CODE
* * * * * * *
PART I--CRIMES
* * * * * * *
CHAPTER 90--PROTECTION OF TRADE SECRETS
Sec.
1831. Economic espionage.
* * * * * * *
[1836. Civil proceedings to enjoin violations.]
1836. Civil proceedings.
* * * * * * *
Sec. 1832. Theft of trade secrets
(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] the
greater of $5,000,000 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.
Sec. 1833. Exceptions to prohibitions
[This chapter] (a) In General._This chapter does not
prohibit or create a private right of action for--
(1) any otherwise lawful activity conducted by a
governmental entity of the United States, a State, or a
political subdivision of a State; or
(2) [the reporting of a suspected violation of law
to any governmental entity of the United States, a
State, or a political subdivision of a State, if such
entity has lawful authority with respect to that
violation] the disclosure of a trade secret in
accordance with subsection (b).
(b) Immunity From Liability for Confidential Disclosure of
a Trade Secret to the Government or in a Court Filing.--
(1) Immunity.--An individual shall not be held
criminally or civilly liable under any Federal or State
trade secret law for the disclosure of a trade secret
that--
(A) is made--
(i) in confidence to a Federal,
State, or local government official,
either directly or indirectly, or to an
attorney; and
(ii) solely for the purpose of
reporting or investigating a suspected
violation of law; or
(B) is made in a complaint or other
document filed in a lawsuit or other
proceeding, if such filing is made under seal.
(2) Use of trade secret information in anti-
retaliation lawsuit.--An individual who files a lawsuit
for retaliation by an employer for reporting a
suspected violation of law may disclose the trade
secret to the attorney of the individual and use the
trade secret information in the court proceeding, if
the individual--
(A) files any document containing the trade
secret under seal; and
(B) does not disclose the trade secret,
except pursuant to court order.
(3) Notice.--
(A) In general.--An employer shall provide
notice of the immunity set forth in this
subsection in any contract or agreement with an
employee that governs the use of a trade secret
or other confidential information.
(B) Policy document.--An employer shall be
considered to be in compliance with the notice
requirement in subparagraph (A) if the employer
provides a cross-reference to a policy document
provided to the employee that sets forth the
employer's reporting policy for a suspected
violation of law.
(C) Non-compliance.--If an employer does
not comply with the notice requirement in
subparagraph (A), the employer may not be
awarded exemplary damages or attorney fees
under subparagraph (C) or (D) of section
1836(b)(3) in an action against an employee to
whom notice was not provided.
(D) Applicability.--This paragraph shall
apply to contracts and agreements that are
entered into or updated after the date of
enactment of this subsection.
(4) Employee defined.--For purposes of this
subsection, the term ``employee'' includes any
individual performing work as a contractor or
consultant for an employer.
(5) Rule of construction.--Except as expressly
provided for under this subsection, nothing in this
subsection shall be construed to authorize, or limit
liability for, an act that is otherwise prohibited by
law, such as the unlawful access of material by
unauthorized means.
* * * * * * *
Sec. 1835. Orders to preserve confidentiality
[In any prosecution] (a) In General._In any prosecution
or other proceeding under this chapter, the court shall enter
such orders and take such other action as may be necessary and
appropriate to preserve the confidentiality of trade secrets,
consistent with the requirements of the Federal Rules of
Criminal and Civil Procedure, the Federal Rules of Evidence,
and all other applicable laws. An interlocutory appeal by the
United States shall lie from a decision or order of a district
court authorizing or directing the disclosure of any trade
secret.
(b) Rights of Trade Secret Owners.--The court may not
authorize or direct the disclosure of any information the owner
asserts to be a trade secret unless the court allows the owner
the opportunity to file a submission under seal that describes
the interest of the owner in keeping the information
confidential. No submission under seal made under this
subsection may be used in a prosecution under this chapter for
any purpose other than those set forth in this section, or
otherwise required by law. The provision of information
relating to a trade secret to the United States or the court in
connection with a prosecution under this chapter shall not
constitute a waiver of trade secret protection, and the
disclosure of information relating to a trade secret in
connection with a prosecution under this chapter shall not
constitute a waiver of trade secret protection unless the trade
secret owner expressly consents to such waiver.
[Sec. 1836. Civil proceedings to enjoin violations]
Sec. 1836. Civil proceedings
(a) The Attorney General may, in a civil action, obtain
appropriate injunctive relief against any violation of this
chapter.
[(b) The district courts of the United States shall have
exclusive original jurisdiction of civil actions under this
section.]
(b) Private Civil Actions.--
(1) In general.--An owner of a trade secret that is
misappropriated may bring a civil action under this
subsection if the trade secret is related to a product
or service used in, or intended for use in, interstate
or foreign commerce.
(2) Civil seizure.--
(A) In general.--
(i) Application.--Based on an
affidavit or verified complaint
satisfying the requirements of this
paragraph, the court may, upon ex parte
application but only in extraordinary
circumstances, issue an order providing
for the seizure of property necessary
to prevent the propagation or
dissemination of the trade secret that
is the subject of the action.
(ii) Requirements for issuing
order.--The court may not grant an
application under clause (i) unless the
court finds that it clearly appears
from specific facts that--
(I) an order issued
pursuant to Rule 65 of the
Federal Rules of Civil
Procedure or another form of
equitable relief would be
inadequate to achieve the
purpose of this paragraph
because the party to which the
order would be issued would
evade, avoid, or otherwise not
comply with such an order;
(II) an immediate and
irreparable injury will occur
if such seizure is not ordered;
(III) the harm to the
applicant of denying the
application outweighs the harm
to the legitimate interests of
the person against whom seizure
would be ordered of granting
the application and
substantially outweighs the
harm to any third parties who
may be harmed by such seizure;
(IV) the applicant is
likely to succeed in showing
that--
(aa) the
information is a trade
secret; and
(bb) the person
against whom seizure
would be ordered--
(AA)
misappropriated
the trade
secret of the
applicant by
improper means;
or
(BB)
conspired to
use improper
means to
misappropriate
the trade
secret of the
applicant;
(V) the person against whom
seizure would be ordered has
actual possession of--
(aa) the trade
secret; and
(bb) any property
to be seized;
(VI) the application
describes with reasonable
particularity the matter to be
seized and, to the extent
reasonable under the
circumstances, identifies the
location where the matter is to
be seized;
(VII) the person against
whom seizure would be ordered,
or persons acting in concert
with such person, would
destroy, move, hide, or
otherwise make such matter
inaccessible to the court, if
the applicant were to proceed
on notice to such person; and
(VIII) the applicant has
not publicized the requested
seizure.
(B) Elements of order.--If an order is
issued under subparagraph (A), it shall--
(i) set forth findings of fact and
conclusions of law required for the
order;
(ii) provide for the narrowest
seizure of property necessary to
achieve the purpose of this paragraph
and direct that the seizure be
conducted in a manner that minimizes
any interruption of the business
operations of third parties and, to the
extent possible, does not interrupt the
legitimate business operations of the
person accused of misappropriating the
trade secret;
(iii)(I) be accompanied by an order
protecting the seized property from
disclosure by prohibiting access by the
applicant or the person against whom
the order is directed, and prohibiting
any copies, in whole or in part, of the
seized property, to prevent undue
damage to the party against whom the
order has issued or others, until such
parties have an opportunity to be heard
in court; and
(II) provide that if access is
granted by the court to the applicant
or the person against whom the order is
directed, the access shall be
consistent with subparagraph (D);
(iv) provide guidance to the law
enforcement officials executing the
seizure that clearly delineates the
scope of the authority of the
officials, including--
(I) the hours during which
the seizure may be executed;
and
(II) whether force may be
used to access locked areas;
(v) set a date for a hearing
described in subparagraph (F) at the
earliest possible time, and not later
than 7 days after the order has issued,
unless the party against whom the order
is directed and others harmed by the
order consent to another date for the
hearing, except that a party against
whom the order has issued or any person
harmed by the order may move the court
at any time to dissolve or modify the
order after giving notice to the
applicant who obtained the order; and
(vi) require the person obtaining
the order to provide the security
determined adequate by the court for
the payment of the damages that any
person may be entitled to recover as a
result of a wrongful or excessive
seizure or wrongful or excessive
attempted seizure under this paragraph.
(C) Protection from publicity.--The court
shall take appropriate action to protect the
person against whom an order under this
paragraph is directed from publicity, by or at
the behest of the person obtaining the order,
about such order and any seizure under such
order.
(D) Materials in custody of court.--
(i) In general.--Any materials
seized under this paragraph shall be
taken into the custody of the court.
The court shall secure the seized
material from physical and electronic
access during the seizure and while in
the custody of the court.
(ii) Storage medium.--If the seized
material includes a storage medium, or
if the seized material is stored on a
storage medium, the court shall
prohibit the medium from being
connected to a network or the Internet
without the consent of both parties,
until the hearing required under
subparagraph (B)(v) and described in
subparagraph (F).
(iii) Protection of
confidentiality.--The court shall take
appropriate measures to protect the
confidentiality of seized materials
that are unrelated to the trade secret
information ordered seized pursuant to
this paragraph unless the person
against whom the order is entered
consents to disclosure of the material.
(iv) Appointment of special
master.--The court may appoint a
special master to locate and isolate
all misappropriated trade secret
information and to facilitate the
return of unrelated property and data
to the person from whom the property
was seized. The special master
appointed by the court shall agree to
be bound by a non-disclosure agreement
approved by the court.
(E) Service of order.--The court shall
order that service of a copy of the order under
this paragraph, and the submissions of the
applicant to obtain the order, shall be made by
a Federal law enforcement officer who, upon
making service, shall carry out the seizure
under the order. The court may allow State or
local law enforcement officials to participate,
but may not permit the applicant or any agent
of the applicant to participate in the seizure.
At the request of law enforcement officials,
the court may allow a technical expert who is
unaffiliated with the applicant and who is
bound by a court-approved non-disclosure
agreement to participate in the seizure if the
court determines that the participation of the
expert will aid the efficient execution of and
minimize the burden of the seizure.
(F) Seizure hearing.--
(i) Date.--A court that issues a
seizure order shall hold a hearing on
the date set by the court under
subparagraph (B)(v).
(ii) Burden of proof.--At a hearing
held under this subparagraph, the party
who obtained the order under
subparagraph (A) shall have the burden
to prove the facts supporting the
findings of fact and conclusions of law
necessary to support the order. If the
party fails to meet that burden, the
seizure order shall be dissolved or
modified appropriately.
(iii) Dissolution or modification
of order.--A party against whom the
order has been issued or any person
harmed by the order may move the court
at any time to dissolve or modify the
order after giving notice to the party
who obtained the order.
(iv) Discovery time limits.--The
court may make such orders modifying
the time limits for discovery under the
Federal Rules of Civil Procedure as may
be necessary to prevent the frustration
of the purposes of a hearing under this
subparagraph.
(G) Action for damage caused by wrongful
seizure.--A person who suffers damage by reason
of a wrongful or excessive seizure under this
paragraph has a cause of action against the
applicant for the order under which such
seizure was made, and shall be entitled to the
same relief as is provided under section
34(d)(11) of the Trademark Act of 1946 (15
U.S.C. 1116(d)(11)). The security posted with
the court under subparagraph (B)(vi) shall not
limit the recovery of third parties for
damages.
(H) Motion for encryption.--A party or a
person who claims to have an interest in the
subject matter seized may make a motion at any
time, which may be heard ex parte, to encrypt
any material seized or to be seized under this
paragraph that is stored on a storage medium.
The motion shall include, when possible, the
desired encryption method.
(3) Remedies.--In a civil action brought under this
subsection with respect to the misappropriation of a
trade secret, a court may--
(A) grant an injunction--
(i) to prevent any actual or
threatened misappropriation described
in paragraph (1) on such terms as the
court deems reasonable, provided the
order does not--
(I) prevent a person from
entering into an employment
relationship, and that
conditions placed on such
employment shall be based on
evidence of threatened
misappropriation and not merely
on the information the person
knows; or
(II) otherwise conflict
with an applicable State law
prohibiting restraints on the
practice of a lawful
profession, trade, or business;
(ii) if determined appropriate by
the court, requiring affirmative
actions to be taken to protect the
trade secret; and
(iii) in exceptional circumstances
that render an injunction inequitable,
that conditions future use of the trade
secret upon payment of a reasonable
royalty for no longer than the period
of time for which such use could have
been prohibited;
(B) award--
(i)(I) damages for actual loss
caused by the misappropriation of the
trade secret; and
(II) damages for any unjust
enrichment caused by the
misappropriation of the trade secret
that is not addressed in computing
damages for actual loss; or
(ii) in lieu of damages measured by
any other methods, the damages caused
by the misappropriation measured by
imposition of liability for a
reasonable royalty for the
misappropriator's unauthorized
disclosure or use of the trade secret;
(C) if the trade secret is willfully and
maliciously misappropriated, award exemplary
damages in an amount not more than 2 times the
amount of the damages awarded under
subparagraph (B); and
(D) if a claim of the misappropriation is
made in bad faith, which may be established by
circumstantial evidence, a motion to terminate
an injunction is made or opposed in bad faith,
or the trade secret was willfully and
maliciously misappropriated, award reasonable
attorney's fees to the prevailing party.
(c) Jurisdiction.--The district courts of the United States
shall have original jurisdiction of civil actions brought under
this section.
(d) Period of Limitations.--A civil action under subsection
(b) may not be commenced later than 3 years after the date on
which the misappropriation with respect to which the action
would relate is discovered or by the exercise of reasonable
diligence should have been discovered. For purposes of this
subsection, a continuing misappropriation constitutes a single
claim of misappropriation.
* * * * * * *
Sec. 1838. Construction with other laws
[This chapter] Except as provided in section 1833(b), this
chapter 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, or to affect the
otherwise lawful disclosure of information by any Government
employee under section 552 of title 5 (commonly known as the
Freedom of Information Act).
Sec. 1839. Definitions
As used in this chapter--
(1) the term ``foreign instrumentality;'' means any
agency, bureau, ministry, component, institution,
association, or any legal, commercial, or business
organization, corporation, firm, or entity that is
substantially owned, controlled, sponsored, commanded,
managed, or dominated by a foreign government;
(2) the term ``foreign agent'' means any officer,
employee, proxy, servant, delegate, or representative
of a foreign government;
(3) the term ``trade secret'' means all forms and
types of financial, business, scientific, technical,
economic, or engineering information, including
patterns, plans, compilations, program devices,
formulas, designs, prototypes, methods, techniques,
processes, procedures, programs, or codes, whether
tangible or intangible, and whether or how stored,
compiled, or memorialized physically, electronically,
graphically, photographically, or in writing if--
(A) the owner thereof has taken reasonable
measures to keep such information secret; and
(B) the information derives independent
economic value, actual or potential, from not
being generally known to, and not being readily
ascertainable through proper means by, [the
public] another person who can obtain economic
value from the disclosure or use of the
information; [and]
(4) the term ``owner'', with respect to a trade
secret, means the person or entity in whom or in which
rightful legal or equitable title to, or license in,
the trade secret is reposed[.];
(5) the term ``misappropriation'' means--
(A) acquisition of a trade secret of
another by a person who knows or has reason to
know that the trade secret was acquired by
improper means; or
(B) disclosure or use of a trade secret of
another without express or implied consent by a
person who--
(i) used improper means to acquire
knowledge of the trade secret;
(ii) at the time of disclosure or
use, knew or had reason to know that
the knowledge of the trade secret was--
(I) derived from or through
a person who had used improper
means to acquire the trade
secret;
(II) acquired under
circumstances giving rise to a
duty to maintain the secrecy of
the trade secret or limit the
use of the trade secret; or
(III) derived from or
through a person who owed a
duty to the person seeking
relief to maintain the secrecy
of the trade secret or limit
the use of the trade secret; or
(iii) before a material change of
the position of the person, knew or had
reason to know that--
(I) the trade secret was a
trade secret; and
(II) knowledge of the trade
secret had been acquired by
accident or mistake;
(6) the term ``improper means''--
(A) includes theft, bribery,
misrepresentation, breach or inducement of a
breach of a duty to maintain secrecy, or
espionage through electronic or other means;
and
(B) does not include reverse engineering,
independent derivation, or any other lawful
means of acquisition; and
(7) the term ``Trademark Act of 1946'' means the
Act entitled ``An Act to provide for the registration
and protection of trademarks used in commerce, to carry
out the provisions of certain international
conventions, and for other purposes, approved July 5,
1946 (15 U.S.C. 1051 et seq.) (commonly referred to as
the `Trademark Act of 1946' or the `Lanham Act')''.
* * * * * * *
CHAPTER 96--RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS
Sec. 1961. Definitions
As used in this chapter--
(1) ``racketeering activity'' means (A) any act or
threat involving murder, kidnapping, gambling, arson,
robbery, bribery, extortion, dealing in obscene matter,
or dealing in a controlled substance or listed chemical
(as defined in section 102 of the Controlled Substances
Act), which is chargeable under State law and
punishable by imprisonment for more than one year; (B)
any act which is indictable under any of the following
provisions of title 18, United States Code: Section 201
(relating to bribery), section 224 (relating to sports
bribery), sections 471, 472, and 473 (relating to
counterfeiting), section 659 (relating to theft from
interstate shipment) if the act indictable under
section 659 is felonious, section 664 (relating to
embezzlement from pension and welfare funds), sections
891-894 (relating to extortionate credit transactions),
section 1028 (relating to fraud and related activity in
connection with identification documents), section 1029
(relating to fraud and related activity in connection
with access devices), section 1084 (relating to the
transmission of gambling information), section 1341
(relating to mail fraud), section 1343 (relating to
wire fraud), section 1344 (relating to financial
institution fraud), section 1351 (relating to fraud in
foreign labor contracting), section 1425 (relating to
the procurement of citizenship or nationalization
unlawfully), section 1426 (relating to the reproduction
of naturalization or citizenship papers), section 1427
(relating to the sale of naturalization or citizenship
papers), sections 1461-1465 (relating to obscene
matter), section 1503 (relating to obstruction of
justice), section 1510 (relating to obstruction of
criminal investigations), section 1511 (relating to the
obstruction of State or local law enforcement), section
1512 (relating to tampering with a witness, victim, or
an informant), section 1513 (relating to retaliating
against a witness, victim, or an informant), section
1542 (relating to false statement in application and
use of passport), section 1543 (relating to forgery or
false use of passport), section 1544 (relating to
misuse of passport), section 1546 (relating to fraud
and misuse of visas, permits, and other documents),
sections 1581-1592 (relating to peonage, slavery, and
trafficking in persons)., sections 1831 and 1832
(relating to economic espionage and theft of trade
secrets), section 1951 (relating to interference with
commerce, robbery, or extortion), section 1952
(relating to racketeering), section 1953 (relating to
interstate transportation of wagering paraphernalia),
section 1954 (relating to unlawful welfare fund
payments), section 1955 (relating to the prohibition of
illegal gambling businesses), section 1956 (relating to
the laundering of monetary instruments), section 1957
(relating to engaging in monetary transactions in
property derived from specified unlawful activity),
section 1958 (relating to use of interstate commerce
facilities in the commission of murder-for-hire),
section 1960 (relating to illegal money transmitters),
sections 2251, 2251A, 2252, and 2260 (relating to
sexual exploitation of children), sections 2312 and
2313 (relating to interstate transportation of stolen
motor vehicles), sections 2314 and 2315 (relating to
interstate transportation of stolen property), section
2318 (relating to trafficking in counterfeit labels for
phonorecords, computer programs or computer program
documentation or packaging and copies of motion
pictures or other audiovisual works), section 2319
(relating to criminal infringement of a copyright),
section 2319A (relating to unauthorized fixation of and
trafficking in sound recordings and music videos of
live musical performances), section 2320 (relating to
trafficking in goods or services bearing counterfeit
marks), section 2321 (relating to trafficking in
certain motor vehicles or motor vehicle parts),
sections 2341-2346 (relating to trafficking in
contraband cigarettes), sections 2421-24 (relating to
white slave traffic), sections 175-178 (relating to
biological weapons), sections 229-F (relating to
chemical weapons), section 831 (relating to nuclear
materials),(C) any act which is indictable under title
29, United States Code, section 186 (dealing with
restrictions on payments and loans to labor
organizations) or section 501(c) (relating to
embezzlement from union funds), (D) any offense
involving fraud connected with a case under title 11
(except a case under section 157 of this title), fraud
in the sale of securities, or the felonious
manufacture, importation, receiving, concealment,
buying, selling, or otherwise dealing in a controlled
substance or listed chemical (as defined in section 102
of the Controlled Substances Act), punishable under any
law of the United States, (E) any act which is
indictable under the Currency and Foreign Transactions
Reporting Act, (F) any act which is indictable under
the Immigration and Nationality Act, section 274
(relating to bringing in and harboring certain aliens),
section 277 (relating to aiding or assisting certain
aliens to enter the United States), or section 278
(relating to importation of alien for immoral purpose)
if the act indictable under such section of such Act
was committed for the purpose of financial gain, or (G)
any act that is indictable under any provision listed
in section 2332b(g)(5)(B);
(2) ``State'' means any State of the United States,
the District of Columbia, the Commonwealth of Puerto
Rico, any territory or possession of the United States,
any political subdivision, or any department, agency,
or instrumentality thereof;
(3) ``person'' includes any individual or entity
capable of holding a legal or beneficial interest in
property;
(4) ``enterprise'' includes any individual,
partnership, corporation, association, or other legal
entity, and any union or group of individuals
associated in fact although not a legal entity;
(5) ``pattern of racketeering activity'' requires
at least two acts of racketeering activity, one of
which occurred after the effective date of this chapter
and the last of which occurred within ten years
(excluding any period of imprisonment) after the
commission of a prior act of racketeering activity;
(6) ``unlawful debt'' means a debt (A) incurred or
contracted in gambling activity which was in violation
of the law of the United States, a State or political
subdivision thereof, or which is unenforceable under
State or Federal law in whole or in part as to
principal or interest because of the laws relating to
usury, and (B) which was incurred in connection with
the business of gambling in violation of the law of the
United States, a State or political subdivision
thereof, or the business of lending money or a thing of
value at a rate usurious under State or Federal law,
where the usurious rate is at least twice the
enforceable rate;
(7) ``racketeering investigator'' means any
attorney or investigator so designated by the Attorney
General and charged with the duty of enforcing or
carrying into effect this chapter;
(8) ``racketeering investigation'' means any
inquiry conducted by any racketeering investigator for
the purpose of ascertaining whether any person has been
involved in any violation of this chapter or of any
final order, judgment, or decree of any court of the
United States, duly entered in any case or proceeding
arising under this chapter;
(9) ``documentary material'' includes any book,
paper, document, record, recording, or other material;
and
(10) ``Attorney General'' includes the Attorney
General of the United States, the Deputy Attorney
General of the United States, the Associate Attorney
General of the United States, any Assistant Attorney
General of the United States, or any employee of the
Department of Justice or any employee of any department
or agency of the United States so designated by the
Attorney General to carry out the powers conferred on
the Attorney General by this chapter. Any department or
agency so designated may use in investigations
authorized by this chapter either the investigative
provisions of this chapter or the investigative power
of such department or agency otherwise conferred by
law.
* * * * * * *
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