- U.S. House Judiciary Committee Approves Legislation Creating Civil Cause of Action Under Federal Trade Secrets Protection Act
- October 17, 2014 | Authors: John C. Glancy; Sharon P. Margello
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Federal trade secret legislation may be closer than you think. On September 17, 2014, the Judiciary Committee of the U.S. House of Representatives approved H.R. 5233, the Trade Secrets Protection Act of 2014, with one amendment. The bill, which will now move to the full House of Representatives for a vote, would create a federal private right of action for trade secret theft. A federal civil cause of action for misappropriation of trade secrets would be a powerful tool for employers to use to combat the theft of protected information that is increasingly flowing across state and international borders as domestic and foreign companies become more competitive. The current version of H.R. 5233 provides for the award of attorneys’ fees under certain circumstances.
House Judiciary Committee Chairman Bob Goodlatte (R-VA) gave opening remarks endorsing H.R. 5233 stating,
Though trade secrets are not formally reviewed, they are protected from “misappropriation,” which includes obtaining the trade secret through improper or unlawful means, and “misappropriation” can take many forms, whether it is an employee selling blueprints to a competitor or a foreign agent hacking into a server... Today in this committee, we are taking a positive step toward improving our trade secrets laws and building on our work in this area of intellectual property.
The law, which was sponsored and co-sponsored by Representatives George Holding (R-NC) and Jerry Nadler (D-NY), would also permit a seizure order on an ex parte basis for the preservation of evidence. In response to arguments that the ex parte seizure provision was anticompetitive, several House Democrats introduced an amendment to strike that portion of the text, but the amendment was voted down.
However, the House Judiciary Committee did agree on an amendment that adds language to the bill protecting website operators that disclose misappropriated trade secrets from liability and seizures. The amendment has several components. It attempts to clarify that a seizure order may not be issued unless the subject of the order is the misappropriator. According to the text of the amendment, it does not limit “the exemption from liability that website operators have for content published by third parties.” Furthermore, the amendment provides that H.R. 5233 does not affect other federal laws, in particular, section 230 of the Communications Decency Act of 1996, which exempts websites from liability stemming from content created by others.
Finally, the amendment requires that a study be conducted on trade secret theft occurring outside the United States in addition to the creation of a report, reflecting the findings of the study. The report should also include recommendations on legislative and executive actions to address the issue of foreign trade secret theft.
The companion bill to the Trade Secrets Protection Act of 2014 is currently pending before the U.S. Senate Judiciary Committee. The Defend Trade Secrets Act of 2014, S. 2267, which was sponsored by Senators Christopher Coons (D-DE) and Orrin Hatch (R-UT), has been debated, but a legislative markup has not yet been scheduled for the bill.
The next step for H.R. 5233 is consideration by the full House of Representatives-which could occur as early as November after the upcoming elections.