Two Steps Forward, One Step Back: The Defend Trade Secrets Act of 2016 and Why the Computer Fraud and Abuse Act of 1984 Still Matters for Trade Secret Misappropriation

Journal of Legislation, Apr 2017

By Patrick J. Manion, Published on 04/06/17

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Two Steps Forward, One Step Back: The Defend Trade Secrets Act of 2016 and Why the Computer Fraud and Abuse Act of 1984 Still Matters for Trade Secret Misappropriation

Journal of Legislation Two Steps For ward, One Step Back: The Defend Trade Secrets Act of 2016 and W hy the Computer Fraud and Abuse Act of 1984 Still Matters for Trade Secret Misappropriation Patrick J. Manion Follow this and additional works at: http://scholarship.law.nd.edu/jleg Part of the Intellectual Property Law Commons, and the Legislation Commons - Article 6 Patrick J. Manion INTRODUCTION Trade secrets are a form of intellectual property provided legal protection due to their independent economic value. What material satisfies as a “trade secret” depends on the jurisdiction where relief is sought and which law is applied. However, generally a trade secret is information—including a formula, pattern, compilation, program, device, method, technique or process.1 Until recently, trade secrets were unique among the various forms of intellectual property because they were not afforded federal protection.2 Indeed, today trade secret misappropriation is primarily addressed through state versions of the Uniform Trade Secrets Act, as well as the common law.3 Trade secret theft costs the United States economy between $300 and $480 billion a year.4 Fights over valuable trade secret theft have ensnared some of the largest and most recognizable names in U.S. industry.5 In recognition of this growing concern, Congress passed the Defend Trade Secrets Act of 2016 with overwhelming bipartisan support in May of 2016.6 The legislative intent of the Act was 1 See Trade Secret, BLACK’S LAW DICTIONARY (10th ed. 2014) (“A formula, process, device, or other business information that is kept confidential to maintain an advantage over competitors; information — including a formula, pattern, compilation, program, device, method, technique, or process — that (1) derives independent economic value, actual or potential, from not being generally known or readily ascertainable by others who can obtain economic value from its disclosure or use, and (2) is the subject of reasonable efforts, under the circumstances, to maintain its secrecy.”). 2 In contrast, federal laws existed which protected trademarks, patents, and copyrights. 3 See, e.g., RESTATEMENT OF TORTS, § 757 (AM. LAW INST. 1939) and RESTATEMENT OF UNFAIR COMPETITION, § 39 (AM. LAW INST. 1995). 4 S. REP. NO. 114-220, at 2 (2016). 5 See, e.g., Siobhan Hughes, Senate Passes Trade-Secrets Bill, THE WALL STREET JOURNAL, (Apr. 4, 2016), https://www.wsj.com/articles/senate-passes-trade-secrets-bill-1459807973 (“DuPont Co. spent six years on a trade-secrets case involving Kevlar, a fiber used in bulletproof vests. In that case, DuPont enlisted the Justice Department’s help to go after Kolon Industries Inc., alleging that it had recruited former DuPont employees in to steal technological know-how that took DuPont decades to develop. The companies ultimately settled about a year ago, with Kolon agreeing to pay DuPont $275 million in restitution.”). 6 Office of the Clerk of The United States House of Representatives, Final Vote Results for Roll Call 172, (Apr. 27, 2016), http://clerk.house.gov/floorsummary/floor.aspx?day=20160427&today=20170225. to clarify conflicting state laws regarding trade secret misappropriation and to provide a new federal civil cause of action for aggrieved parties.7 Prior to passage of the Defend Trade Secrets Act, aggrieved parties had to rely on an independent basis for federal jurisdiction or contort their claim to satisfy elements of a cause of action under the Computer Fraud and Abuse Act of 1984, the Economic Espionage Act of 1996, or general criminal statutes. The Economic Espionage Act and general criminal statutes are often ineffective. For example, while the Economic Espionage Act “makes it a Federal criminal offense to misappropriate a trade secret that has an interstate or foreign nexus … [the Act] does not give trade secret owners a private right of action in Federal court.”8 Therefore, a party asserting a claim under the Economic Espionage Act must rely on the Federal Government to criminally prosecute the case, and “while economic espionage and the theft of trade secrets is a top priority for federal law enforcement, criminal enforcement remains a limited solution to stopping trade secret theft as the Federal Bureau of Investigation and Department of Justice are limited in the resources they can bring to bear.”9 Another option is to bring a trade secret misappropriation claim under state law. Forty-seven states and the District of Columbia have adopted some version of the Uniform Trade Secrets Act; however, state variations in the application of the Uniform Trade Secrets Act have led to inconsistent outcomes across jurisdictions.10 This is where the Defend Trade Secrets Act becomes relevant by affording a new means for private parties to obtain federal jurisdiction. This allows them to bypass the foibles of conflicting state law without the burden of providing an independent basis for federal jurisdiction or having to use the Compute (...truncated)


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Patrick J. Manion. Two Steps Forward, One Step Back: The Defend Trade Secrets Act of 2016 and Why the Computer Fraud and Abuse Act of 1984 Still Matters for Trade Secret Misappropriation, Journal of Legislation, 2017, Volume 43, Issue 2,