I’ve had the opportunity to consider the pros and cons of the Kohl/Coons Amendment to the Economic Espionage Act (EEA), an amendment that would add a civil cause of action to that criminal statute. (I wrote about the Amendment’s introduction last Fall and a PDF of it can be found here). For the four reasons below, the Amendment is worth supporting and those in the trade secret community should throw their weight behind its passage.
No. 1: It provides a needed international remedy. Trade secret cases have an increasingly international component. As articles in the New York Times and Wall Street Journal this past week made clear, many companies are in need of a remedy to protect trade secrets misappropriated overseas. DuPont’s dispute with Kolon, Motorola’s dispute with Lemko, DuPont’s dispute with Pangang Group and Walter Liew, the TianRui Group case, the hacking directed at Nortel — all of these high profile cases involve international parties.
The Amendment’s express purposes is combatting international esponiage. As Senator Kohl has noted, “[t]he problem of economic espionage is not new, but it has grown and evolved as the information age has reached a point where trade secrets can circle the globe in the blink of an eye. U.S. corporations face intense competition at home and abroad. As much as 80% of the assets of today’s companies are intangible trade secrets. They must be able to protect their trade secrets to remain competitive and keep our economy strong.”
As Todd Sullivan’s Trade Secrets Blog noted last year, Senator Coons expressed the same concern: “When foreign companies and governments steal our ideas, they’re stealing more than just formulas and schematics — they’re stealing jobs. These amendments are rooted in specific concerns I have heard repeatedly from manufacturers in Delaware who operate in a constant state of fear that their innovations are going to be stolen and sold by a foreign company.”
No. 2: The ex parte seizure order is a powerful tool. The Amendment provides for an ex parte proceeding that authorizes the seizure of misappropriated product or the preservation of evidence. While short in duration (the foreign party has to have notice within 72 hours), this provision could be very important in international trade secret disputes.
This is the real wild card within the Amendment. As the facts of the DuPont v. Kolon and Walter Liew cases make clear, foreign parties may not be terribly concerned with the niceties of the preservation of evidence. Having the ability to seize and preserve critical evidence in the digital age is an important tool to have in your trade secret toolbox. As federal courts are some times loathe to grant ex parte remedies, having a statutory basis to do so will be a significant advantage for a litigant.
No. 3: Nationwide service of process assists in injunctive proceedings. Nationwide service of process can be particularly important in a trade secret case. Anyone who has litigated a trade secret case knows proof of misappropriation is one of the biggest hurdle to overcome. Forensic evidence certainly helps but at the end of the day, a trade secret litigant will likely have to prove misappropriation by circumstantial evidence.
To build that case, third parties will need to be subpoenaed for documents and testimony. If they are located out of state or overseas, that will require a request for a commission or letters rogatory to seek enforcement outside that state. This process, in the best of circumstances, can take weeks and if it is opposed, it could take months. As trade secret cases frequently arise in the context of injunctive relief and are, by their nature, very contentious, this can frustrate the gathering of important evidence and prompt relief.
The Amendment’s authorization of nationwide service of process would reduce that problem. To the extent that there would be need for international service, the EEA amendment would provide jurisdiction to federal courts to the full extent of Due Process. While service might still be necessary in some situations, it is an improvement over the status quo.
No. 4: The EEA Amendment has great symbolic value. At the present time there is no federal cause of action available to companies or inventors to protect their trade secrets. Federal trademark, copyright and patent causes of action all exist for a party seeking to protect those rights. Given the increasing prominence of trade secrets as a measure of protection, coupled with the uncertainty over patent protection as a result of recent Supreme Court decisions and the newly-enacted American Invents Act, a federal statute should be in place to reinforce that federal commitment.
Is the Amendment perfect? Of course not. As David Almeling’s post last year with Patently O noted, the Amendment is confined to misappropriation related to products. While I would prefer to see a broader definition, there may not be another opportunity to get an Amendment like this passed. A narrow remedy, which hopefully can be improved, is better than no remedy at all.
Momentum is hopefully building in support of the Amendment. Last month, the Trade Secret Law Committee of the American Intellectual Property Law Association voted resoundingly in favor of a resolution supporting the Amendment to the AIPLA’s Board of Directors. The Committee’s Legislative Chair, Russell Beck, who has experience with legislation over Massachusetts’ Non-Compete bill, will be working with the staffs of Senator Kohl and Coons to help move the Amendment forward.
Let’s do what we can to support the Amendment. Contact your own Senators and House Representative and make it clear that you think this Amendment is important and deserves their support. Talk to your clients and urge them to contact their Senator and tell them that the Amendment needs to pass. We shouldn’t let this historic opportunity slip away.