Bill to Federalize Trade Secrets Claims Moves Forward

A bill to extend federal jurisdiction to claims for theft of trade secrets, the Defend Trade Secrets Act of 2015 (S. 1890), has been reported out of committee to the full chamber.  Trade secrets are largely the subject of state law, and the federal courts currently lack jurisdiction of a claim for theft of trade secrets, unless there is diversity of citizenship or joinder with a transactionally-related federal-question claim such as trademark infringement.

The bill is co-sponsored by Republicans and Democrats.

The bill creates a civil action with original federal jurisdiction brought by “an owner of a trade secret that is misappropriated . . . if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.”  The bill sets conditions for the “seizure of property necessary to prevent the propagation or dissemination of the trade secret that is the subject of the action.”

The bill would also create a cause of action by “a person who suffers damage by reason of a wrongful or excessive seizure.”

One of the remedies that is authorized is, of course, damages:

[a court may] (B) award—

(i)

(I) damages for actual loss caused by the misappropriation of the trade secret; and

(II) damages for any unjust enrichment caused by the misappropriation of the trade secret that is not addressed in computing damages for actual loss; or

(ii) in lieu of damages measured by any other methods, the damages caused by the misappropriation measured by imposition of liability for a reasonable royalty for the misappropriator’s unauthorized disclosure or use of the trade secret . . .

(As an aside: Could (B)(ii) be characterized as an award of statutory damages, currently under attack in the Supreme Court in Spokeo, Inc. v. Robins?)

A brief description of the bill’s background by David J. Kappos, former director of the United States Patent & Trademark Office, is in thehill.com.