A trade secret is an essential form of intellectual property whose economic value is contingent upon remaining secret. The formula for Coca-Cola is a highly recognized trade secret, but virtually all American businesses rely on their unique and often invisible trade secrets -- manufacturing processes, technologies, formulas, prototypes, computer codes, techniques and other proprietary innovations. A majority of startups and small businesses are built from the ground up on their trade secrets.
And these businesses must take great pains to keep this information secret, because its value is lost if it is disclosed either inadvertently or through misappropriation. Trade secret theft undermines investment in research and development, and puts American jobs at risk. Providing adequate federal protection for this form of intellectual property is therefore critical to the viability of small and large businesses -- as well as to the economic security and global competitiveness of the United States.
Unlike other forms of IP – like patents or trademarks – trade secrets are afforded very limited protection under federal law. The bulk of companies’ IP assets consist of trade secrets, and yet there is no federal civil remedy when their trade secrets are stolen. And, current trade secret law, a patch quilt of the federal Economic Espionage Act and state law adaptations of the Uniform Trade Secrets Act, was enacted at a time when theft was still accomplished by physical means. Today, digital technology has enabled theft on a mass scale -- by foreign governments, competitors and others. According to a February 2013 White House report, “the pace of economic espionage and trade secret theft against U.S. corporations is accelerating” and the report cites several recent cyberattacks by foreign entities and governments.
The impact of trade secret theft on our economy is enormous, and it is a growing threat to America’s competitive edge. Trade secrets protect U. S. assets worth an estimated 5 trillion dollars, and it is estimated that $300 billion dollars’ worth of trade secret assets are stolen every year, often electronically and across borders, according to a U.S. Chamber of Commerce study. Requiring victims to seek relief in state courts in the face of this global pandemic is rather weak tea, and the Justice Department only has the resources to pursue a limited number of criminal cases of interstate trade secret theft each year. Therefore, businesses desperately need to be given the same civil remedies to protect their trade secrets at the federal level that the law accords to other forms of IP.
The Defend Trade Secrets Act of 2015 (DTSA) would establish a federal civil remedy for the first time, giving American companies the tools they need to combat the borderless theft of their most valuable assets. And it would create a consistent, harmonized legal framework that would build upon the Economic Espionage Act to create a uniform standard and federal civil cause of action to stem the tide of revenue and job loss that goes hand in hand with the theft of trade secrets. This important legislation would give innovators the ability to seek injunctions against use or disclosure, to petition for the seizure of stolen assets, and to seek an award of damages from entities that have stolen their property. In doing so, it would significantly mitigate the harm to American businesses and workers, while safeguarding employee mobility and adopting other explicit protections against potential abuse of these civil remedies.
The DTSA, which was introduced in both houses of Congress this past July, has broad bipartisan support with 22 Senate and 107 House co-sponsors to date. It also enjoys widespread support from companies and organizations representing all sectors of the innovation economy, including manufacturing, services, medical devices, software, agriculture, pharmaceutical, biotech, automotive and clean technologies.
Congress is to be commended for the care it has taken to address concerns about potential misuse of the legislation’s provisions, and as a consequence the bill’s original sponsors have been able to continue to build and deepen support for the legislation among all industry groups and other interested parties. This legislation has been carefully drafted and negotiated and is now ready to move to markup by the Judiciary Committee as a first step toward passage. Congress should seize this opportunity to put a win on the board for America’s innovators, whose core intellectual property assets are under constant threat. By doing so, Congress would also be taking an important step toward protecting one of the key drivers of economic growth and job creation.
Pappas is president of Innovation Strategies LLC. He is a former chief of staff of the U.S. Patent and Trademark Office, where he served from 2009 to 2013.