Senate Judiciary Committee OK’s Trade Secrets Bill

February 3, 2016

Opic-court-gaveln Jan. 28, the Senate Judiciary Committee approved by a voice vote the Defend Trade Secrets Act of 2015 (DTSA/S.1890/H.R. 3326).The measure was introduced by Senate Finance Committee Chairman Orrin Hatch (R-Utah) and garnered broad bipartisan support with over 27 cosponsors, 12 of them Democratic. There has been similar support for the DTSA in the House where it has not yet been considered by the House Judiciary Committee. However, it is expected to be easily approved by the committee when it is considered, as it also enjoys bipartisan support with 30 Democratic cosponsors of its 107 supporters.

Although the legislation is widely supported, there have been concerns that it could create avenues for companies to harass competitors, particularly those with former employees on staff. In addition to creating a right of action at the federal level for trade secret misappropriation, the legislation contains an ex-parte seizure provision. This controversial provision allows a party, upon presentation of evidence, to request a federal court issue an order to seize third party property containing misappropriated trade secrets without prior notice to the third party. This provision was amended during the markup to instruct that this measure only be used in extraordinary circumstances that evidence must be presented to show that the third party has actual possession of the trade secrets as well as the property to be seized, and introduce measures to protect the third party’s non-infringing property.

When momentum behind patent reform dissipated in fall of 2015, it began to coalesce behind trade secret reform. Part of the push behind trade secret reform is an effort to create a new standard, which will likely permeate throughout the world, for trade secret protections before the European Union does. Trade secret reform legislation has drawn Congressional attention in prior years. Legislation was introduced in both the House and Senate in the 113th Congress; however, neither bill ultimately received floor consideration.

NSBA supports strong intellectual property protections for small businesses. Small businesses depend on their intellectual property far more than their larger counterparts. For many small businesses and startups, intellectual property may constitute their most valuable asset. Trade secrets are much easier to acquire than other forms of intellectual property and most small businesses have them. The importance of fixing loopholes in the system to further protection small business intellectual property cannot be overstated.