House Committee OKs Trade Secrets Bill

April 20, 2016

pic-contract-patentOn April 20, 2016, the House Judiciary Committee approved the Defend Trade Secrets Act of 2015 (DTSA/S. 1890) introduced by Sen. Orrin Hatch (R-Utah) last year. The legislation was unanimously approved by the Senate earlier this year by a vote of 87-0. Companion legislation, H.R. 3326, had been introduced in the House by Rep. Doug Collins (R-Ga.). However, despite garnering 150 cosponsors, the House Judiciary Committee has opted to consider the Senate-passed version instead. NSBA has sent letters of support to both the House and Senate Judiciary Committees in support of the legislation.

The trade secrets legislation seeks to create a federal right of action for trade secrets misappropriation. Trade secret law cases are now generally filed in state court as there was not a direct path into federal court for trade secret misappropriation cases. The Defend Trade Secrets act will create that pathway into federal court and make it easier for trade secret holders to file suits against misappropriators in different jurisdictions.

Upon initial introduction, there were concerns about an ex-parte seizure provision in the DTSA that codifies a court’s ability to order a third party’s property seized if it contains misappropriated trade secret material. However, the Senate Judiciary Committee adopted several amendments to the legislation to ensure that those seizures cannot be misused as a form of corporate espionage. After the amendments were adopted, S. 1890 now requires the courts to specifically define what is being sought in search orders and require all the seized material be kept in isolation to ensure no private information is inadvertently turned over along with trade secrets and that the filing party does not get improper access to trade secret information.

It was previously unclear whether the House Judiciary Committee would adopt the same amendments as the Senate. However, since the House is marking up the Senate version of the legislation, those amendments are incorporated into the legislation approved by the committee.

NSBA supports strong intellectual property rights for small businesses. With recent reforms to the patent system making the patent system less workable for small businesses, trade secrets are becoming increasingly important to the small-business community. Most small businesses have trade secrets of one form or another, and many of those will need to defend them at some point. The DTSA takes the important step of opening a pathway into federal court for trade secret holders which could potentially allow them to move more quickly during a trade secret misappropriation case involving multiple jurisdictions.