Legislative Developments

May 1, 2014

Earlier this week, senators from Delaware (Chris Coons, Democrat) and Utah (Orrin Hatch, Republican) introduced the Defend Trade Secrets Act which would create a private right of action for individuals and private companies to sue for theft of trade secrets in federal court. Despite failed attempts to introduce similar legislation in the past, both senators are confident that this bill will fair better than its predecessors; they are hoping that bipartisan support for the Defend Trade Secrets Act will carry it all the way to the President's desk.

September 25, 2013

In a recent development in the Massachusetts state legislature, a bill that addresses the practice of non-compete agreements in the state is gaining traction - HB No. 1715 would restrict non-compete agreements in the state. According to Section 1(a) of the bill, “the Commonwealth of Massachusetts has determined that an employee noncompetition agreement restricting an employee’s mobility for longer than six months is a restraint on trade and harms the economy.” The bill’s language does create two noteworthy exceptions: (1) it allows for noncompetition agreements if the term is six months or less; and (2) the bill does not necessarily apply to employees that “at any time, received annual taxable compensation from the employer of $250,000 or more.” Recently, HB No. 1715 has been referred to the Joint Committee on Labor and Workforce Development. State officials believe that restricting non-competes in this way will foster mobility within the Massachusetts workforce and increase competition.

Click here to follow the status of HB No.1715: https://malegislature.gov/Bills/188/House/H1715

May 31, 2013

On May 2, 2013, Texas Governor Rick Perry officially signed the Texas Uniform Trade Secret Act (“TUTSA”) into law. The act will replace Texas common law, effective September 1, 2013, and apply to all trade secret misappropriation claims filed thereafter. Texas became the 48th state to adopt some form of the Uniform Trade Secrets Act, leaving New York and Massachusetts as the only remaining holdouts.

Click here for full text and analysis of TUTSA.

March 29, 2013

Rep. Mike Rogers (R-Mich.) announced that Congress is working on legislation aimed at punishing nations that support the theft of American trade secrets. Rogers, who is chairman of the House Intelligence Committee, made the announcement following a cyber-security event at Covington & Burlington LLP. Rogers explained that the bill is intended to be a "punitive [measure] on nation-states that steal [American] intellectual property and re-purpose it for government companies to illegally compete in the market . . . .”

This development came on the heels of Obama signing the Consolidated and Further Continuing Appropriations Act into law. That Act includes a provision that limits the U.S. government's ability to transact for information technology with companies that have ties to the Chinese government. This is all in response to the revelatory Mandiant report, which detailed the depth of U.S. trade secret theft by foreign parties - namely China.

March 6, 2013

On March 4, 2013, bill S.B 953 was proposed by Senator John Carona (R-Dallas), seeking to adopt the Uniform Trade Secrets Act into Texas Civil Practice Code. Current Texas trade secrets law is based losely on common law misappropriation, and despite the existence of the Uniform Trade Secrets Act and the Second and Third Restatements of Torts, Texas continues to follow the First Restatement Torts §757. This provision holds a narrow definition of what constitutes trade secret misappropriation, including discovery by (a) improper means, (b) breach of confidence, (c) third party disclosure with knowledge of the third party's duty of confidentiality, or (d) mistaken disclosure and knowledge thereof. Adoption of the UTSA in Texas would mean increased protection for Texas corporations or sole proprietors maintaining trade secret information, granting protection for secret information guarded by "reasonable measures" to maintain that secrecy. Not only does the UTSA eliminate the stringent guidelines for qualification as trade secret misappropriation of the First Restatement Torts §757, but the UTSA also eliminates the requirement that information be in "continuous use" in order to obtain trade secret status. Such expansive provisions supplement the UTSA's primary objective of providing consistency in trade secrets misappropriation decisions, while also providing for punitive damages and attorney's fees awards where applicable.

If Texas adopts proposed legislation S.B. 953 the state will be the 47th to do so since the Act's promulgation, and will go into effect on September 1, 2013.

See the proposed Texas legislation HERE.

February 25, 2013

The White House officially released a report the details its new strategy for "vigorously . . . combat[ing] the theft of U.S. trade secrets that could be used by foreign companies or foreign governments to gain an unfair economic edge.

The report has a five-prong "Strategy Action" item list:

1. Focus Diplomatic Efforts to Protect Trade Secrets Overseas
2. Promote Voluntary Best Practices by Private Industry to Protect Trade Secrets
3. Enhance Domestic Law Enforcement Operations
4. Improve Domestic Legislation
5. Public Awareness and Stakeholder Outreach

The full report can be downloaded here.

February 20, 2013

The White House announced today that it will employ a new strategy to target trade secret theft. The announcement comes on the heels of computer security firm Mandiant's report that a Chinese Military unit hacked at least 115 American companies and put their confidential and proprietary information at risk. Recently, both Apple, Inc. and Facebook have publicly admitted to being victims of cyber attacks.

The White House will host several major corporate executives, where the Obama administration (including U.S. Attorney General Eric Holder, Acting Commerce Secretary Rebecca Blank and White House Intellectual Property Enforcement coordinator Victoria Espinel) will discuss its new strategy to combat this growing problem. Congress recently enacted both the Foreign and Economic Espionage Penalty Enhancement Act of 2012 and the Theft of Trade Secrets Clarification Act, which aim to increase liability and penalties for trade secret theft. Last week, the President signed an Executive Order on Improving Critical Infrastructure Cyber Security.

January 13, 2013

The Alaska Oil and Gas Conservation Commission recently proposed a new law that would force energy companies to, amongst other things, reveal chemicals used in the hydraulic fracturing process. Hydraulic fracturing (or “Hydro-fracking”) a process in which fractures in rocks below the earth's surface are opened and widened by injecting chemicals and liquids at high pressure: used especially to extract natural gas or oil. These chemical processes had previously been protected from disclosure through trade secrecy. However, the proposed rules would increase notification and disclosure requirements for energy companies performing hydro-fracking activities.

January 3, 2013

On January 1, 2013, the U.S. House of Representative passed a bill that increases the maximum penalty for individuals convicted of violating the Economic Espionage Act. The Senate had previously approved the bill on December 19, 2012, and it now goes to President Barack Obama for approval.

The Foreign and Economic Espionage Penalty Enhancement Act of 2012, H.R.6029, increases maximum fines for both organizations and individuals that steal domestic trade secrets in order to benefit a foreign entity. For Individuals, the maximum fine is increased from $500,000 to $5 millions. For organizations, the maximum fine is increased from $10 million to $10 million or "three times the value of the stolen trade secret to the organization, including expenses for research and design and other costs of reproducing the secret that the organization has thereby avoided."

In addition, the bill instructs the United State Sentencing Commission to "review and, if appropriate, amend the Federal sentencing guidelines and policy statements applicable to persons convicted" of stealing or attempting to steal trade secrets with the “inten[t] that the offense would benefit a foreign government, foreign instrumentality, or foreign agent . . . ." The Commission shall consult with a wide array of agencies, including (but not limited to) law enforcement, trade secret owners, the DOJ and the United States Department of Homeland Security. The Commission must complete its review within 180 days of the Act's enactment.

January 3, 2013

On December 28th, 2012, President Barack Obama signed the Theft of Trade Secrets Clarification Act of 2012 ("Clarification Act") into law.

As previously discussed on TSI, the law (which passed unanimously in the House and Senate) was passed in response to the Second Circuit's controversial decision in United States v. Aleynikov. The Clarification Act broadens the EEA’s reach by striking the relevant language in § 1832(a) (i.e. ‘‘or included in a product that is produced for or placed in’’) and inserting ‘‘a product or service used in or intended for use in’’.