As promised, I am posting my intended letter to the Obama Administration’s U.S. Intellectual Property Enforcement Coordinator, Victoria Espinel, in response to her recent request for public comments on potential trade secret legislation.
Executive Summary: Regular readers of this blog will not be surprised as I advocate that a civil cause of action be added to the existing framework of the Economic Espionage Act (EEA), preferably by enacting a modified version of the Protecting American Trade Secrets and Innovation Act (PATSIA) proposed last year by U.S. Senator Chris Coons.
I have proposed three modifications to PATSIA (explained in greater detail in my letter below):
(1) that the statute be confined to international trade secret misappropriation;
(2) that objections to venue, such as forum non conveniens, be prohibited so long as the requirements of 28 U.S.C. §1391 are met; and
(3) that PATSIA’s ex parte seizure order be scaled back and modelled after what are commonly known as Anton Piller orders which are used in Commonwealth nations to prevent the destruction of evidence.
For those that have not provided their comments to the Administration yet but wish to do so by Monday, April 22, 2013 (tomorrow), the link to provide comments can be found here.
Here is my letter:
The Honorable Victoria Espinel
Re: Response to Request for Public Comments for “Trade Secret Theft Strategy Legislative Review” (78 Fed. Reg. 16875, March 19, 2013)
Dear Ms. Espinel:
I am submitting this letter in response to the Administration’s “Request for Comments and Notice for Trade Secret Theft Strategy Legislative Review” as published in the Federal Register (the “Notice”).
The Growing International Trade Secret Threat and The Need for Further Legislative Action. The rise in the theft of trade secrets from U.S. companies by foreign hackers and international misappropriation has been widely reported and is well documented. Last year, the National Security Agency described trade secret theft as the greatest transfer of wealth in history, estimating the losses of theft of trade secrets and cyber breaches to be in excess of $334 billion per year. In February 2013, the security company Mandiant Corporation reported that the Chinese government was sponsoring cyber-espionage to attack top U.S. companies. Likewise, CREATE.org has recently released a white paper that highlights how far-reaching and challenging the risks of trade secret theft are for companies operating on a global scale.
The Missing Component: A Federal Civil Cause of Action. For these reasons, I believe that the Administration should use its considerable influence and resources to support legislation creating a federal civil cause of action and remedy for international trade secret misappropriation utilizing the existing framework of the Economic Espionage Act (“EEA”).
This federal civil cause of action or remedy should not undermine, preempt or disturb existing state law causes of action and remedies, which are more than adequate to address domestic trade secret theft. Rather, the federal civil cause of action would be directed exclusively to remedying situations involving the theft of trade secrets by international misappropriation. Any federal civil cause of action should provide remedies similar to those provided in the Uniform Trade Secret Act (“UTSA”), including providing for appropriate injunctive relief, unconditional royalty damages, attorneys’ fees, and exemplary damages equal to at least the twice any award of damages.
A federal cause of action empowering companies to protect their own trade secrets from international misappropriation would help relieve the federal government, in this time of limited government resources, of sole responsibility for the protection of American trade secrets abroad. In addition, enforcement would be enhanced because U.S. companies understand their own technology and trade secrets best and they are incentivized to litigate aggressively to protect those assets. In addition, despite their best efforts, government agencies and prosecutors may not be able to move as quickly or with the nimbleness of a private litigant in some circumstances. Given the importance of speed and injunctive relief in trade secret cases, a federal private right of action would be a powerful tool in the case of international trade secret misappropriation.
While state trade secret laws afford U.S. companies many protections, they cannot match the potential international scope and procedural remedies or protection that a federal court can provide in the case of international trade secret misappropriation. The ability to issue and serve subpoenas throughout the U.S. and the broad jurisdictional powers of federal courts would greatly assist many trade secret claimants in cases of international misappropriation.
The Administration Should Support the Protecting American Trade Secrets and Innovation Act with Three Modifications. Senator Chris Coons previously introduced legislation (S. 3389, 112th Congress), known as the Protecting American Trade Secrets and Innovation Act of 2012 (“PATSIA”), that seeks to amend the EEA to provide, among other things, a private civil cause of action for trade secret theft.
The Administration should support enactment of PATSIA. In addition, I would respectfully propose the following three modifications:
1. PATSIA should be focused and confined to international trade secret misappropriation. Existing state law trade secret remedies are more than adequate to protect domestic trade secret misappropriation.
2. To ensure that the civil cause of action’s remedial purpose (i.e., providing American companies with a federal forum for international misappropriation) is not frustrated, PATSIA should preclude objections to venue, such as challenge on the grounds of forum non conveniens, so long as the action satisfies the venue requirements of 28 U.S.C. §1391.
3. The ex parte seizure order proposed under PATSIA should be narrowed and additional safeguards should be added to ensure that it is not misused. I would propose that the seizure order be modeled on Anton Piller orders that have been utilized by courts in Australia, Canada and the United Kingdom to seize and protect evidence. To secure an ex parte seizure order, I would propose that an applicant be required to establish the following by clear and convincing evidence: (a) a strong prima facie case against the defendant; (b) that the alleged misappropriation is serious and that there is a probability of irreparable injury; and (c) that there is a possibility that the defendant will destroy or remove relevant evidence or misappropriated product. Finally, to ensure protection and preservation of the material to be seized, a judicial officer should be appointed to oversee execution of the order and to retain possession of any evidence or product that is seized until the defendant has an opportunity to challenge the seizure.
Thank you for the opportunity to be heard. If I can provide any further assistance or information, please do not hesitate to let me know.
Very truly yours,
John F. Marsh