Do We Need a Federal Trade Secrets Law?
On October 5, Senators Chris Coons and Herb Kohl introduced an amendment to S. 1619, the Currency Exchange Rate Oversight Reform Act, that would provide a private civil cause of action in federal court for trade secret theft. The proposal, however, appears to be a solution in search of a problem, and the amendment was not ultimately included in the legislation, which passed the Senate on October 11.
The proposed amendment would have amended the criminal statute for theft of trade secrets, 18 U.S.C. § 1831 et seq., to allow “[a]ny person aggrieved by a violation of [18 U.S.C. § 1832(a)]” to bring a civil action in federal court. Such an action need only
- “describe with specificity the reasonable measures taken to protect the secrecy of the alleged trade secrets in dispute;” and
- include a sworn representation “that the dispute involves either substantial need for nationwide service of process or misappropriation of trade secrets from the United States to another country.”
18 U.S.C. § 1832(a), generally imposes liability on anyone who knowingly steals, copies, buys or possesses a trade secret that is “related to or included in a product” placed in interstate or foreign commerce with the knowledge that the offense will, injury the owner of the trade secret.
In their press releases announcing the amendment, found here and here, Senators Coons and Kohl focused on protecting American companies from trade secret theft by foreign companies and governments. Senator Coons gave three reasons for enacting the legislation:
- The amendment would allow victimized trade secret owners to sue in federal court;
- The amendment would allow for a single, uniform, nationwide cause of action; and
- The amendment would “elevate” trade-secret intellectual property to the same level as copyright, trademark and patent violations.
None of these reasons, however, hold much water. First, trade secret owners already have a way to bring suit in federal court – diversity jurisdiction. As Dupont’s recent $900 million verdict in the Eastern District of Virginia against a Korean company amply demonstrates, the federal courts are already open to state-law trade secret suits against foreign companies. The only claims that this amendment would affect would be claims where the parties were from the same state and claims where the amount in dispute is less than $75,000. Those categories of claims seem just the kind of local dispute that should remain in state court, rather than adding to the burden of already busy federal courts.
The amendment also would not create a uniform nationwide cause of action for the simple reason that it would not preempt state law. Litigants will still bring their state-law trade secret claims; this proposal will simply add a duplicative federal cause of action.
Finally, it’s hard to see why trade secret law needs to be “elevated” to the level of copyright, trademark and patent violations. Sure, trade secret law differs from state to state, but that’s true of all kinds of civil claims. Differences in individual state laws, standing alone, don’t justify federalizing civil causes of action. There also isn’t any indication that the current state-law schemes for protection of state laws aren’t working. In the absence of examples of trade secret owners being unable to protect their trade secret rights under existing state law, this proposal appears unnecessary.
Senators Coons’ and Kohl’s proposal did not make it very far. The Senate took up S. 1619, which dealt primarily with Chinese currency manipulation, and passed it on October 11 without considering the trade secret amendment.