Protect trade secrets

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

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.