A Federal Trade Secret Act?

Unlike patents, trademarks, and copyright, there is no federal trade secret statute. Instead, each of the 50 states has its own laws. And, although most of states have adopted some version of the Uniform Trade Secrets Act (only Massachusetts, New Jersey, New York, North Carolina, and Texas have not, although New Jersey seems to be close, and Massachusetts is perennially considering the issue), there is not a truly cohesive body of law. Some think that adoption of a federal statute will cure that.

One step in that direction is the Economic Espionage Act of 1996 (18 U.S.C. §§ 1831-1839), which criminalizes trade secret misappropriation on a federal level. However, there is no private right of action under that statute (meaning that companies whose trade secrets have been stolen can only bring a claim under state law).

Although earlier this year, there was movement to stiffen the criminal penalties (see Economic Espionage Act Update), no provision was made for a civil action. Recently, however, Senator Herb Kohl and Christopher Coons (Kohl was responsible for the original Act and both introduced the bill to stiffen the criminal penalties) introduced introduced a bill that would give companies a private right of action under the Economic Espionage Act.

The bill would permit companies to bring a civil action if: (1) their trade secrets have been stolen (as set forth in 18 U.S.C. § 1832(a)); (2) they have taken reasonable measures to protect their trade secrets (which reasonable measures must be detailed in the complaint); and (3) they make a “sworn representation” that there is either a “substantial need for nationwide service of process” or there has been “misappropriation of trade secrets from the United States to another country.”

Should the bill be adopted as written, it is the third requirement (which is not an element of state law claims) that will severely limit the availability of a federal remedy. Specifically, absent international misappropriation or some serious deficiency in the relevant state’s service of process rules (neither of which is present in the vast majority of these cases), the statute will not apply. In short, while (in my opinion) it is a step in the right direction, there is a lot more to do before we will have a truly comprehensive federal trade secret law.

UPDATE: for additional discussion on this issue, see John Marsh‘s discussion, “Could a Federal Trade Secret Cause of Action Finally Be in the Works.”

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