Last week, Senators Hatch and Coons introduced bipartisan legislation, called the Defend Trade Secrets Act, that would create a federal private right of action for trade-secrets theft. This act adds to the Economic Espionage Act, which was passed in 1996 and made trade-secret theft a crime. Copies of the Defend Trade Secrets Act and the Economic Espionage Act are linked below.
While I’m still thinking through some of these issues, my first reaction to this law is a strongly positive one. Companies would benefit from having a national standard for trade-secret misappropriation. Today, while most states have adopted the Uniform Trade Secret Act (UTSA), there are state-by-state variations in the statutory text and interpretation. Also, this law would allow companies to litigate in federal court, where cases often proceed more quickly than in state court.
The act also acknowledges the e-discovery issues that frequently arise in trade-secret litigation by allowing for the ex parte entry of an order to preserve evidence, specifically allowing an order compelling “a copy of an electronic storage medium that contains the trade secret.” Today, it can be difficult to obtain such an order, with plaintiffs forced to resort to conventional injunction proceedings in front of state-court judges, who may not be as familiar with e-discovery issues.
The Defend Trade Secrets Act has a five-year statute of limitations, as opposed to the three years in the UTSA. Given that misappropriation is commonly done through surreptitious means, five years is more reasonable.
This proposed law is not perfect—for example, I would like to see a broader definition of “improper means” instead of just adopting the UTSA’s definition—but overall, this law would be a step forward for companies trying to protect their trade secrets. Hopefully, this bipartisan effort will have more success than other recent attempts to create a federal civil action for trade-secrets misappropriation.