Senate Passes Trade Secrets Bill          

April 6, 2016

pic-court-lawOn April 4, the Senate unanimously approved the Defend Trade Secrets Act of 2015 (DTSA/S. 1890) by a vote of 87-0. The legislation was introduced by Senate Committee on Finance Chairman Orrin Hatch (R-Utah) last year and was approved by the Senate Committee on Judiciary by voice vote in January. NSBA supports this legislation and sent a letter to Senate leadership urging them to bring the bill to floor for consideration.

The legislation creates a federal right of action for trade secret holders, which will allow them to file misappropriation cases in the federal courts located throughout the country. Trade secrets are now generally governed by state law and cases most often must be filed in state court. The changes introduced by this legislation are particularly important, especially to small innovators, because they will allow the trade secret holder to act more quickly in misappropriation cases where the other party is located across state lines.

S. 1890 also codifies an ex-parte seizure provision whereby a trade secret holder can go to court and request that it seize property that contains misappropriated trade secrets. Courts already have the power to do this, however this legislation would make that ability more concrete. Concerns regarding this provision and its potential to be used inappropriately as a means of harassment and corporate espionage led to the approval of amendments to the legislation during the Judiciary Committee markup. During the markup, additional restrictions were added to that provision which require the trade secret holder establish the third party is in actual possession of the trade secrets that require the court to specifically define what will be seized and to isolate the seized material from both parties until it is established whether the property contains trade secrets.

Companion legislation (H.R. 3326) was introduced into the House by Rep. Doug Collins (R-Ga.). That legislation is currently before the House Judiciary Committee and is expected to be considered in the near future now that the Senate has approved their version of the bill. NSBA sent a letter to the House Judiciary Committee urging them to adopt the same amendments as the Senate Judiciary Committee and approve the legislation without delay.

Trade secrets are quickly becoming the most important form of intellectual property for small businesses as the U.S. patent system becomes increasingly unworkable for small businesses. Most small businesses have trade secrets of one form or another and this legislation therefore directly extends protections to most of the country’s smallest employers. The DTSA will make it easier and faster for small businesses to defend their trade secrets and is essential to the long term health of small business intellectual property rights.