Defend Trade Secrets Act of 2015 Faces Criticism 2.0

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On August 28, 2015, TSW continued its coverage of the 2015 Defend Trade Secrets Act (“2015 DTSA”), introduced in both the House and Senate on July 28, 2015, with its comparison of the 2015 DTSA to last year’s failed 2014 House Bill. In today’s post, TSW continues with its extensive coverage of the 2015 DTSA, detailing both the criticisms it is facing and the progress it has made in Congress.

Last year, a group of 31 law professors urged Congress to reject the proposed 2014 House Bill in a letter, available here. The law professors identified five primary reasons why Congress should reject the act: (1) effective state law already exists, (2) the Act will weaken uniformity of state law while simultaneously creating potentially damaging parallel law, (3) the Act is imbalanced and could be used for anti-competitive purposes, (4) the Act increases the risk of accidental disclosure of trade secrets, and (5) the Act may have a negative impact on access to information, business, and employee mobility.

As with the failed 2014 House Bill, the 2015 DTSA faces similar criticism, although to a markedly decreased extent. On August 3, 2015, only two of the law professors, out of the previous 31, signed a new letter to Congress, renewing their opposition to the 2015 DTSA, available here. This letter and its criticisms are detailed here:

  • “The wrong is defined differently.” The 2015 DTSA creates a cause of action for a “a person aggrieved by a misappropriation of a trade secret that is related to a product or service used in or intended for use in, interstate or foreign commerce.” The professors identify two primary issues with this language. First, it is unclear how “person aggrieved” is defined, and in combination with the “sense of Congress” section discussed below, it may mean something less than actual harm. Second, because the cause of action must arise pursuant to the Commerce Clause, state trade secret law will continue to exist in parallel, which will result in less uniformity in jurisprudence.
  • “The ill-advised ex parte civil seizure remedy remains.” Despite the changes to this section from the 2014 House Bill, the professors urge that the ex parte seizure is still “an unprecedented remedy that can be used to effectively shut-down legitimate competition.”
  • “Employee mobility concerns.” Congress added limiting language to the 2015 DTSA’s remedies provisions, stating injunctions cannot “prevent a person from accepting an offer of employment under conditions that avoid actual or threatened misappropriation.” The professors caution this may still be read as endorsing a cause of action for inevitable disclosure, “a highly controversial common law doctrine,” and may negatively impact employee mobility.
  • “Report on theft of trade secrets occurring abroad.” The professors criticize the ambiguity created by the use of the term “theft” and not “misappropriation.” The professors also suggest this type of a report is a “political football” and a waste of funds, which could be better spent elsewhere.
  • “Sense of Congress” Section. The professors take issue with the language in this section, because Congress’s statement—“trade secret theft … harms the companies that own the trade secrets”—assumes harm, which is a separate element of misappropriation that must be proven, and ultimately may amplify the risk of trolling behavior.

As for the 2015 DTSA’s progress through Congress, on August 29, 2015, both the House and the Senate referred the 2015 DTSA to their respective Committees on the Judiciary with bipartisan support, including 30 cosponsors in the House and 6 cosponsors in the Senate. Of those cosponsors, 19 are Republican and 17 are Democrat. At least in the House, momentum appears to be building, with additional cosponsors signing up weekly. In contrast, the 2014 House Bill had 23 cosponsors in the House and only one cosponsor in the Senate, with a mere eight Democrats supporting the proposed bill.

The marked decrease in criticism from academia toward this legislation, and the increased bipartisan support in Congress, may suggest that the 2015 DTSA has better hopes of moving forward. TSW will continue to keep you up to date with all the latest developments, as Congress attempts to create federal protection for trade secret misappropriation.