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By Tony Dutra
Jan. 28 — The Senate Judiciary Committee approved legislation that would create a private right of action in federal court for trade secret theft by a unanimous voice vote Jan. 28.
The panel approved the measure after adding limits to when law enforcement can seize materials claimed to be secret. Changes were also made to address concerns that the original language arguably made it more difficult for an employee to take a new job with a competitor.
The revised bill is unlikely to appease critics who oppose the seizure provisions entirely, but lawmakers' comments at the markup session generally lauded the sponsors for responding to their concerns.
Currently, only the U.S. Department of Justice has the right to pursue alleged trade secrets thieves in federal court. The bill would allow companies to do so as well. It also would establish a federal standard for what constitutes trade secret theft, though state laws, which generally adapted the Uniform Trade Secrets Act (UTSA), are left untouched.
The changes made in markup primarily related to the seizure provisions of the DTSA—when law enforcement officials can act to seize materials identified by an owner as trade secrets without first seeking a response from the party alleged to be misappropriating the materials. Sen. John Cornyn (R-Texas) was satisfied that the changes limited seizure only to “extraordinary circumstances.”
The modifications were incorporated in a substitute amendment, offered by Sens. Orrin G. Hatch (R-Utah) and Christopher A. Coons (D-Del.).
An amendment by Sen. Patrick J. Leahy (D-Vt.) and Charles Grassley (R-Iowa), offering a separate provision that would protect whistle-blowers from threats by their trade-secret-owning company, was also approved.
The prospects for a vote on the full Senate floor have improved since the latter part of 2015.
At that time, Grassley, the Senate Judiciary Committee chairman, reportedly did not want the trade secrets legislation to take away from the patent litigation reform bill he is sponsoring, S. 1139.
“The reason we didn't do the trade secrets bill sooner was we thought it would get mixed up with that,” Grassley told Bloomberg News after the markup session. “But now that patent trolling is taking more time on the floor than we anticipated, we thought we needed to go ahead with this,” he said.
He did not otherwise provide a timetable for how quickly the bill could move.
The House Judiciary Committee has not yet acted on H.R. 3326, sponsored by Rep. Doug Collins (R-Ga.), which was identical to the unamended Senate version. A committee aide, asked for comment about the prospects for that bill—and whether the Senate's changes are acceptable—responded only that “protecting American intellectual property from criminal theft remains a priority for the House Judiciary Committee.”
There was little opposition to the bill when the Senate Judiciary Committee held a hearing Dec. 2 (232 PTD, 12/3/15).
However, the seizure provisions were in a House bill in the last Congress and only added to the Senate bill in S. 1890. The hearing gave Leahy and Sen. Sheldon Whitehouse (D-R.I.) a first chance to express their concern, particularly after one witness said that they represented “a highly complex and troublesome remedy that is fraught with potential abuse.”
But Leahy and Whitehouse joined Cornyn at the markup session in praising the changes their colleagues made in the substitute. The changes included:
Trade secret law practitioner and UTSA advocate Stephen Chow of Burns & Levinson, Boston (196 PTD, 10/9/15), was pleased that the new version limited punitive damages to two times compensatory damages, and that the substitute reduced the statute of limitations from five years to three, in line with UTSA.
But, Chow said in an e-mail, “They did not fix the mismatch otherwise between EEA and UTSA definitions of trade secrets. Because of the emphasis on ‘owner' [in S. 1890], the EEA definition will be more limited.”
Also at the Dec. 2 hearing, Coons and Sen. Thom Tillis (R-N.C.) questioned whether the language in the bill potentially gives companies the power to harass employees moving to a competitor, despite limited reason to believe they are leaving with the firm's trade secrets.
Sen. Dianne Feinstein (D-Calif.) was pleased with related changes in the substitute, saying that the bill now echoes California non-competition law.
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