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
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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)