Last week, Senators Herb Kohl (D-WI ) and Christopher Coons (D-DE) introduced a bill that would amend the Economic Espionage Act of 1996 (EEA), 18 U.S.C. §§ 1831-1839, to include a civil cause of action for trade secret theft provided a plaintiff provides a sworn declaration that  there is either a “substantial need for nationwide service of process” or there has been “misappropriation of trade secrets from the United States to another country.”  This amendment, styled as the Protecting American Trade Secrets and Innovation Act, appears to be the first step to providing a long-desired federal remedy to private trade secret claimants.

The EEA criminalizes two types of activity: (1) § 1831(a) criminalizes the misappropriation of trade secrets with the knowledge or intent that the theft will benefit a foreign power; and (2) § 1832 criminalizes the misappropriation of trade secrets related to or included in a product that is produced for or placed in interstate or international commerce, with the knowledge or intent that the misappropriation will injure the owner of the trade secret. While the EEA authorizes civil proceedings by the Department of Justice, it does not supply a private cause of action.

Some notable voices in the trade secret community, in particular, Mark Halligan and David Almeling, have argued for a federal statute for trade secrets. David has argued that the Uniform Trade Secret Act (UTSA), while well-intentioned, has failed its purpose of providing the requisite certainty and uniformity. Mark, on the other hand, has advocated the path proposed by Senators Kohl and Coons, that the EEA simply be amended to supplement existing state remedies and provide federal access and nationwide service of process.
Substantively, the EEA does not differ radically from the UTSA, which has been adopted in most states. Like the UTSA, the EEA broadly defines what information can qualify as a trade secret, electing to go the route of greater specificity in detailing the categories of information which may qualify as a trade secret. The EEA permits a lower threshold on the “economic value” component, allowing a subjective as opposed to objective measure of valuation. On the flip side, the EEA imposes higher burdens on proving the requisite intent for misappropriation.
The proposed amendment would provide an ex parte seizure remedy for property being misappropriated under the EEA or to preserve evidence in the civil action. As a practical matter, getting any ex parte relief in either state or federal court is difficult, if not impossible, as courts are reluctant to entertain ex parte proceedings. Under the amendment, an ex parte order could be secured if a party can demonstrate by clear and convincing evidence that the ex parte order is necessary to prevent irreparable injury.  This could be a significant procedural advantage.  (A copy of the proposed amendment is attached in a PDF format below for those that would like to review it).
One important question, however, appears to be whether the proposed civil statute would be available to most trade secret claimants. Russell Beck’s Fair Competition Law Blog has expressed the concern that the bill’s sworn declaration requirement may present a severe procedural obstacle and unduly limit the amendment’s protections to only a few trade secret claimants. Russell points out that the vast majority of state courts provide for adequate service of process throughout the United States, which would make it difficult for a party to supply the requisite sworn declaration of substantial need. The alternative basis, misappropriation of trade secrets to another country, would require international activity.
The American Intellectual Property Law Association’s (AIPLA) Trade Secret Committee will be considering a resolution on whether to recommend support for the amendment at its meeting on October 20, at 3:30 p.m. in Washington, D.C.  I am speaking on a panel at the AIPLA’s Annual Meeting, so I am planning on attending that meeting and will report back on what the Committee decides.
Whatever its shortcomings, the proposed amendment is an improvement over the existing situation as it provides the first step in establishing a long-sought federal remedy for trade secret plaintiffs.

 EEA Amendment.pdf (25.96 kb)