Hatch Lauds Passage of Trade Secrets Bill as a “Critical Victory for IP and Business Communities”
Legislation expected to pass House of Representatives and become law soon
Theft of trade secrets costs U.S. businesses hundreds of billions each year
WASHINGTON, D.C.—Today the Senate passed the Defend Trade Secrets Act—a bipartisan bill co-authored by Senators Orrin Hatch (R-UT) and Chris Coons (D-DE) that will save the American economy billions of dollars each year by combatting trade secret theft. This legislation—which passed the Senate by a vote of 87-0—advances a key reform to intellectual property law by allowing companies to defend their trade secrets in federal court. Under current law, trade secrets—which include customer lists, algorithms, software codes, unique designs, industrial techniques, and food recipes—are the only form of intellectual property that U.S. businesses cannot protect from misuse or theft through federal civil action.
"Passage of this legislation is not only a critical victory for the intellectual property and business communities, but also an example of what Congress can accomplish when we put party politics aside and focus on areas of agreement,” Senator Hatch said. “Throughout my Senate service, I have always sought to to advance public policy priorities that will benefit everyday Americans and strengthen the national economy. Through this bill, we can do both.”
“For too long, businesses in Delaware and across the country that drive our country’s innovation and economic growth have been losing jobs and revenue because their trade secrets are open to theft,” said Senator Coons. “I’m thrilled the Senate came together in a bipartisan way to pass our bill that will finally give trade secrets the same legal protections that other forms of critical intellectual property enjoy. It’s a long overdue update that will empower American companies to protect their jobs in the 21st century. I urge the House to pass this bill now so the President can sign it into law as soon as possible.”
The bill is expected to pass the House of Representatives and be signed into law by President Obama in the coming weeks.
Statements of Support
The Intellectual Property Owners Association-- [LINK]
This legislation was developed in the spirit of collaboration and consensus-building. We applaud its authors, Sens. Orrin Hatch, R-Utah, and Chris Coons, D-Del., and Reps. Doug Collins, R-Ga., and Jerrold Nadler, D-N.Y., for taking time to consider and address various industries' concerns, and we thank the bill's co-sponsors for their strong leadership, particularly in the current climate of political divisiveness.
The DTSA represents a valuable tool to remedy trade secret theft. The current legal tools available are inefficient and inconsistent with all other areas of intellectual property law, where federal civil remedies exist. Current federal law in this area, covered by the Economic Espionage Act, is limited. Though the FBI and Department of Justice can use this law, they have limited resources and numerous priorities and are not able to pursue all trade secret thefts. Likewise, state trade secret laws are not well-suited to respond to the movement of trade secrets across state and international borders or to act swiftly to preserve evidence and protect trade secrets from being further divulged.
National Association of Manufacturers-- [LINK]
Trade secrets are vital to the competitiveness of companies throughout our economy, and the threat to these innovations is becoming more serious and more complex. By creating a strong, uniform body of trade secrets law nationwide, the DTSA ensures that our laws keep pace.
Congress should move quickly to pass this important legislation because strong trade secrets protection is critical to the American economy and to manufacturers’ competitive advantage in the global economy. The DTSA encourages investment in cutting-edge research and development and will have an immediate, positive impact on our innovative sector, ultimately creating jobs and opportunity in manufacturing in the United States.
U.S. Chamber of Commerce--[LINK]
American innovation has brought consumers across the globe many of the cutting edge products and technologies that have, quite literally, changed the world. From life-saving medicines to computer software to incredibly efficient ways to generate energy, American companies are at the forefront of the “innovation economy” and the creators of millions of domestic jobs.
In an increasingly competitive global marketplace, it is critical that the right tools are in place to ensure that American ideas and jobs are not stolen and sold overseas. The U.S. Chamber of Commerce urges Congress to move this much needed legislation quickly so that it may become law and our industry and workers can remain at the forefront of the innovation economy.
Microsoft and Eli Lilly--[LINK]
Our state-by-state system for trade secret protection was simply not built with the digital world in mind where one device containing purloined information can literally destroy a hard-earned competitive edge. In today’s global economy, however, trade secrets are increasingly stored and used across state line and even national borders. A uniform, national standard for protection will greatly benefit innovative enterprises of all sizes.
We commend Senators Orrin Hatch and Christopher Coons and Representatives Doug Collins and Jerrold Nadler for introducing the bipartisan Defend Trade Secrets Act. This thoughtful and carefully considered legislation will adapt America’s trade secret regime to reflect 21st Century realities and will strengthen this critical form of intellectual property. We urge favorable and expeditious consideration by both the Senate and House.
IM Flash in Lehi, Utah--[LINK]
In a world driven by innovation, American businesses large and small are setting the global standard for creativity and innovation. But the next generation of cutting-edge materials, semiconductors, devices, software applications and high-tech services does not come cheap. America's most innovative companies thrive because they invest in research and development.
We are grateful that the bill's lead proponent is Utah's Sen. Orrin Hatch, whose consensus-driven approach has produced legislation that will benefit innovators in all industries, unifying groups that have often been at odds on other intellectual property issues. The bill enjoys broad, bipartisan support with 65 Senate sponsors and is scheduled for a vote in the Senate after its Easter break.
There is nearly universal agreement on the need for a federal remedy for trade secret theft, and Micron is proud to support legislation that reflects a rare consensus among lawmakers. Strong trade secrets protection is essential for America's global competitiveness because it promotes an environment conducive to cutting-edge research, development, and collaboration. Enacting the bill will have an immediate, positive impact on innovative companies that create jobs in this country. We strongly support the bipartisan efforts of Hatch, and we urge Congress to move quickly to pass this important legislation.
Salt Lake Chamber and the Utah Technology Council--[LINK]
Trade secrets are the lifeblood of Utah's innovation economy. The state's businesses and manufacturers rely on trade secrets to protect their technologies, attract new investors, and maintain a competitive edge. But a glaring oversight in intellectual property law puts Utah jobs at risk. Even though trade secrets safeguard trillions of dollars in U.S. assets, companies have few legal options to protect their trade secrets in federal court if they are stolen — leaving this confidential information vulnerable to theft.
Thankfully, no one understands the heavy costs of trade secret theft better than one Utah's own Sen. Orrin Hatch. As chairman of the Senate Republican High-Tech Task Force, Hatch has established himself as a leading voice for pro-growth, pro-business policies. Now, as he works to implement his Innovation Agenda for the 114th Congress, Hatch is spearheading efforts in Congress to provide greater federal protections to companies threatened by trade secret misappropriation.
Part and parcel to this effort is the Defend Trade Secrets Act — a bipartisan bill Hatch co-authored with Senator Chris Coons, D-Del. With 65 co-sponsors from both parties, the bill is expected to pass with overwhelming support.
This legislation empowers American businesses by creating a private right of action that allows companies to protect their trade secrets in federal court. It also equips business owners with the tools they need to combat trade secret theft, including the ability to seek injunctions and to retrieve stolen assets before they are lost for good.
Background
In today’s electronic age, trade secrets can be stolen with a just a flash drive and a few keystrokes. Increasingly, this critical information is stolen at the direction of a foreign government or for the benefit of a foreign competitor. Trade secret misappropriation puts U.S. jobs at risk and threatens incentives for continued investment in research and development.
Current federal criminal law is insufficient. Although the Economic Espionage Act of 1996 made trade secret theft a crime, the Department of Justice lacks the resources to prosecute many such cases. State-level civil trade secret laws alone have not been sufficient to stop interstate theft. Federal courts are better suited to working across state and national boundaries to facilitate discovery, serve defendants or witnesses, or prevent a party from leaving the country. Laws also vary state-to-state, making it difficult for U.S. companies to craft consistent policies.
The Defend Trade Secrets Act:
Creates a federal civil cause of action for trade secret misappropriation that models the Uniform Trade Secrets Act.
A cause of action requires a showing of:
1) Acquisition of a trade secret by improper means; and
2) Disclosure or use of a trade secret by a person who had reason to know the trade secret was acquired by improper means or under circumstances giving rise to a duty of secrecy.
Additionally, in extraordinary circumstances a court may order an ex parte seizure, based on the requisite showing that such an order is necessary to prevent destruction of evidence or dissemination of the trade secret. A court-ordered seizure must provide for the narrowest seizure necessary, that is least burdensome to the subject, and that allows the accused to seek damages in case of wrongful or excessive seizure.
The Defend Trade Secrets Act also authorizes the award of damages to trade secret owners consistent with the Uniform Trade Secrets Act, including enhanced damages for willful and malicious misappropriation. The bill establishes economic espionage and trade secret misappropriation as RICO predicate offenses. Furthermore, the bill does not preempt state law. Finally, the bill requires the Attorney General to report biannually on trade secret theft occurring outside of the United States.
The bill is supported by ACTI, Adobe, AdvaMed, the Alliance of Automobile Manufacturers, AIPLA, the Association of Global Automakers, Inc., Biotechnology Industry Organization (BIO), The Boeing Company, Boston Scientific, BSA | The Software Alliance (BSA), Caterpillar Inc., Corning Incorporated, The Dow Chemical Company, DuPont, Eli Lilly and Company, Exxon Mobil Corporation, Fiber to the Home Council Americas, Ford Motor Company, General Electric, Honda, IBM, Illinois Tool Works Inc., Information Technology Industry Council (ITI), The Intellectual Property Owners Association (IPO), International Fragrance Association, North America, Internet Commerce Coalition (ICC), Johnson & Johnson, Medical Device Manufacturers Association (MDMA), Medtronic, Michelin, Micron, Microsoft, Monsanto, National Alliance for Jobs and Innovation (NAJI), National Association of Manufacturers (NAM), National Foreign Trade Council, New England Council, NIKE, Pfizer, Philips Light, The Procter & Gamble Company, Royal Philips, SAS, Semiconductor Industry Association (SIA), Siemens Corporation, Software & Information Industry Association (SIIA), Telecommunications Industry Association (TIA), Texas Association of Business, Texas Association of Manufacturers, U.S. Chamber of Commerce, and United Technologies Corporation.
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A better way to protect trade secrets
The current patchwork of state laws puts our country at risk. Here's how to fix it.
By Orrin Hatch and Chris Coons
[LINK]
Trade secrets are the lifeblood of the American economy. Virtually all companies depend on trade secrets to protect their most valuable information and processes. The medical device industry, for example, dedicates enormous resources to the research and development of life-saving products; much of that investment is shielded as trade secrets. Businesses that provide IT infrastructure and data storage—the backbone of the innovation economy—get their competitive edge from proprietary designs and software principally defended by trade secret law. In today’s knowledge- and service-based economy, trade secrets are indispensable to protecting confidential, intangible assets. According to some estimates, trade secrets are worth $5 trillion to the U.S. economy, on par with patents. The loss from their misappropriation is substantial—between $160 billion and $480 billion annually.
Unlike other forms of intellectual property, however, trade secrets lack a specific civil remedy under federal law. That is why for the past two years, we have worked hard to draft and build support for the Defend Trade Secrets Act—a bill that will enable U.S. businesses to protect their trade secrets under federal civil law. Thankfully, our persistence has paid off. Tonight, the Senate will vote on this important bill. With 65 co-sponsors from both parties, the legislation is expected to pass with overwhelming support. Our colleagues, Reps. Doug Collins (R-Ga.) and Jerrold Nadler (D-N.Y.), have worked on this bill tirelessly as well, and now have more than 120 cosponsors, so it is our hope that the House will follow suit shortly, and the president has indicated a willingness to sign the bill into law.
But despite strong bipartisan support, a few naysayers maintain that state law is sufficient for victims of trade secret theft. We could not disagree more. Maintaining the status quo is woefully insufficient to safeguard against misappropriation in today’s fast-paced innovation economy. Here’s why:
Currently, the only federal vehicle for trade secret protection is the Economic Espionage Act, which makes trade secret theft by foreign nationals a criminal offense. But this remedy criminalizes only a small subset of trade secret misappropriation and relies on the thinly stretched resources of the Department of Justice to investigate and prosecute such offenses. As one might expect, federal prosecutors can only bring a relatively small number of cases each year.
The current patchwork of state laws is also insufficient. That was the rationale behind creating the Uniform Trade Secrets Act, which sought to achieve nationwide uniformity in trade secret law. But over time, most states have adopted their own trade secret laws. In fact, state laws today are perhaps even more variable in their treatment of trade secrets than they were at the time the Uniform Trade Secrets Act was proposed in 1979. These differing legal regimes force victims of trade secret theft to wade through a quagmire of time-consuming procedural hurdles in seeking to recover their losses.
For example, if an attorney needs testimony from a witness in another state to support a state-court action for protection of trade secrets, she must first apply to her local court asking that it request the other state to issue its own subpoena for the document and deposition. This process can take weeks, which is an eternity in a trade secret case. Under a uniform federal standard, the process would be far more efficient. That’s because all federal courts apply the Federal Rules of Civil Procedure, allowing attorneys to obtain documents and testimony from a witness in another state without having to apply to that state’s court system. Essentially, enabling businesses to protect their trade secrets in federal court removes an unnecessary layer of bureaucracy and buys companies valuable time.
Streamlining access to remedies is critical in trade secrets cases, where an expedited judicial process may be necessary to deal with flight risks. Unfortunately, once a company’s intellectual property is leaked and the information is made public—even illegally—the trade secret loses its legal protection. Put simply, state law is designed for intrastate litigation and offers limited practical recourse to victims of interstate trade secret theft.
Now is the time to enable U.S. companies to easily and efficiently protect their trade secrets in federal court. The Defend Trade Secrets Act would do precisely that by creating a single uniform national baseline and facilitating companies’ abilities to make their case in federal court. Likewise, the bill would allow victims of trade secret theft to obtain a seizure order in extraordinary circumstances, allowing a federal judge to seize misappropriated property so that it isn’t abused during the pendency of litigation. The bill also supports the freedom of employees to move from one job to another.
The Senate’s vote is not only a watershed moment for the intellectual property and business communities, but also an example of what Congress can accomplish when we put party politics aside and find common ground. Indeed, enacting good public policy in the midst of a toxic presidential campaign is something to celebrate. We call on our colleagues to safeguard innovation and bolster American businesses by passing the Defend Trade Secrets Act.
Orrin Hatch, a Republican, is Utah’s senior senator. He has served since 1977 and is president pro tempore of the Senate, chairman of the Finance Committee, and also is a member of the Judiciary and Health, Education, Labor and Pensions committees. Chris Coons is Delaware’s junior senator, serving since 2010. The Democrat serves on the Appropriations, Foreign Relations, Judiciary, Ethics, and Small Business and Entrepreneurship
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My view: Congress' intellectual property breakthrough: A bipartisan victory for Utah innovators and job creators
I have introduced the Defend Trade Secrets Act — a bipartisan bill that will help Utah’s businesses safeguard their most valuable information by allowing them to protect trade secrets in federal court.
By Orrin Hatch
[LINK]
Utah has earned a well-deserved reputation as one of the top states in the nation for business and innovation. But to ensure that Utah companies continue to thrive, we must do more to protect trade secrets.
Trade secrets are the groundbreaking ideas that give businesses a competitive advantage. They range from unique production and manufacturing processes to food recipes and business plans. This critical form of intellectual property is not only invaluable to individual business owners; it’s also directly responsible for creating millions of jobs in our state.
But a lack of federal legal protections leaves trade secrets vulnerable to theft — an oversight that costs our economy billions of dollars every year.
I am committed to fixing this problem. That’s why I have introduced the Defend Trade Secrets Act — a bipartisan bill that will help Utah’s businesses safeguard their most valuable information by allowing them to protect trade secrets in federal court.
Under current law, companies have few legal options to recover their losses when trade secrets are stolen. For example, if a disgruntled employee steals a Utah company’s confidential information and leaks it to a competitor in Colorado, attorneys must navigate a complex labyrinth of state laws just to bring suit. This cumbersome process can take weeks, which is an eternity in a trade secrets case. During this time, the likelihood that valuable intellectual property falls into the wrong hands increases every day, as does the potential for permanent damage to the company.
My bill addresses this problem by creating a uniform federal standard that organizations can turn to when their trade secrets are stolen. This federal standard keeps companies from getting bogged down in state laws by allowing business owners to take their case directly to a federal court. Essentially, my legislation removes an unnecessary layer of bureaucracy, buying businesses precious time to recover stolen information.
When it is enacted into law, this legislation will be a boon to Utah’s business community. After all, companies across our state depend on trade secrets for their day-to-day business operations. For example, Café Rio uses trade secrets to protect signature recipes, such as its cilantro-lime ranch dressing and its famous sweet pork. DoTerra relies on similar protections to safeguard the manufacturing processes for the essential oils you might use when you get sick. And technology companies like Domo count on trade secret laws to shield confidential codes and algorithms from competitors.
Without trade secrets, these companies would not be able to compete, much less provide jobs for thousands of Utahns. That’s why protecting this information from theft is so critical to our economy. Consider that U.S. businesses lose between $160 billion and $480 billion annually from trade secret misappropriation. This staggering statistic represents thousands of jobs lost every year.
My bill, the Defend Trade Secrets Act, stops the bleeding by strengthening the ability of American companies to defend their most valuable information from theft. For the past two years, I’ve worked tirelessly alongside Sen. Chris Coons (D-Delaware) to draft and build support for this legislation, which already has 65 bipartisan co-sponsors in the Senate and countless endorsements from private companies and nonprofit organizations. The bill is scheduled to pass the Senate on Monday with broad bipartisan support. The House is eager to take up the legislation shortly thereafter so it can head to the president's desk to be signed into law.
By providing American companies with more legal options to protect their most confidential information, this bill will catalyze even greater innovation — not only in Utah but across the nation. I am grateful for the Utah companies who are supporting this commonsense reform, and I urge my fellow lawmakers to follow suit by supporting the Defend Trade Secrets Act.
Orrin Hatch is the senior U.S. senator from Utah.
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We Need To Safeguard The Secrets of America's Innovation Economy
By Michael Harrington and Erich Andersen
Michael Harrington is Eli Lilly’s General Counsel. Erich Andersen is Microsoft’s CVP for Intellectual Property.
[LINK]
America has long been recognized as a world leader in innovation. Not only does the unending flow of new inventions make life better for consumers, it also helps create new jobs and opportunities for millions of American families. The “intellectual property” associated with American innovation is protected by a network of laws, including patents, copyrights, trademarks and trade secrets. These legal protections are essential to reward innovation and encourage continued investment in American research and development. Unfortunately, trade secrets are the only form of intellectual property that do not receive robust federal protection. This needs to change.
Trade secrets include secret formulas, customer lists and methods of manufacturing developed at great expense and that have significant value to companies, which take steps to ensure their confidentiality. American businesses, regardless of size, must be able to continue to invest the enormous resources required to develop the products of the future, from the latest in cloud computing and artificial intelligence to the next generation of life-saving medicines. The Defend Trade Secrets Act, bipartisan legislation pending before the Senate and House, would provide 21stcentury protection for America’s trade secrets. It has the strong support of our companies and scores of others representing a diverse cross section of industries.
In the digitally networked world, the need for robust trade secret protection has only increased. Businesses no longer compete against the company across the street – they sell products across the country and around the world. Gone are the days when a business kept its know-how on paper – its business plans, its manufacturing process, the secret sauce that gave the business a competitive edge – and locked it in a desk drawer or a safe. Today, companies store their data and business-critical information electronically, primarily in the cloud. Decentralization has allowed companies to rely on networks of manufacturers and service providers who must all be able to access, use and store this trade secret information. The ability to share secrets confidentially with such providers, with the knowledge they can be protected, is vital to the continuing growth of the American economy. While digitalization of information has facilitated the access to trade secrets essential to the conduct of business, it has also enabled anyone intent on doing harm to purloin vast amounts of information with no more than a computer key stroke to a thumb drive or the cloud.
Trade secrets are also unique among forms of intellectual property in how they are legally protected. They are governed under state law rather than by federal statute. That is, although it is a federal crime to steal a trade secret, a business that has its trade secrets stolen must rely on state law to pursue a civil remedy. Owners of copyrights, patents, and trademarks can go to federal court to protect their property and seek damages when their property has been infringed, but trade secret owners do not have access to such a federal remedy. This can prove unwieldy and ineffective when the trade secret thief crosses state lines – and all too often these thieves are ultimately heading overseas so that the unscrupulous can unfairly exploit and profit from the fruits of American know how in the global economy. This can result in significant loss of American prosperity and jobs.
Our state-by-state system for trade secret protection was simply not built with the digital world in mind where one device containing purloined information can literally destroy a hard-earned competitive edge. In today’s global economy, however, trade secrets are increasingly stored and used across state line and even national borders. A uniform, national standard for protection will greatly benefit innovative enterprises of all sizes.
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