Bipartisan Trade Secrets Protection Bill Passed by U.S. Senate

UK FARNBOROUGH 2014

A Boeing logo sits on the Boeing Co. company's chalet prior to the opening of the Farnborough International Airshow in Farnborough, U.K., on Sunday, July 13, 2014.

Photographer: Simon Dawson/Bloomberg
  • Corporations would be able to pursue cases in U.S. court
  • House has yet to advance its own bill, but could act quickly

The Senate easily passed a bill Monday allowing corporations to make a federal case of the theft of trade secrets, with backers hoping the House will quickly send it to President Barack Obama’s desk.

The overwhelming 87-0 vote came after the bill providing for federal lawsuits to protect trade secrets received broad backing from the business community, the White House and lawmakers in both parties.

Its main authors, Republican Senator Orrin Hatch of Utah and Democratic Senator Chris Coons of Delaware, hailed the measure as a rare, bipartisan win.

"This trade secret theft can have a devastating long-term impact," Coons said, with corporations now facing a patchwork of state laws.

The bill, S. 1890, was approved by voice vote in the Judiciary Committee in January. A House companion measure, HR. 3326, has 128 co-sponsors.

"We think the Senate vote will create the momentum needed to pass the House quickly and then get signed into law," said Laura Markstein, a spokeswoman for Coons. "This is a rare issue that has not only wide bipartisan support in both houses, but it also has a very broad, diverse coalition of industry groups supporting it."

Patents Stalled

This intellectual property measure appears to have a better chance of becoming law than a broader patent-law overhaul, which has become bogged down by competing interests and other complications. The patent effort is aimed at limiting the impact of "patent trolls" -- a pejorative term for companies that buy patents with the goal of suing to extract settlements.

The White House said Monday that it "strongly supports" the trade secrets bill, saying in a statement that the measure "would provide businesses with a more uniform, reliable, and predictable way to protect their valuable trade secrets anywhere in the country."

National Association of Manufacturers President Jay Timmons applauded the Senate’s action.

“These days, a competitor can steal that knowledge with the click of a mouse, costing a company good-paying jobs or even its entire business," Timmons said in a statement. "This is a critical issue facing manufacturers, one that will define competition and success in the 21st century. That’s why we need all the tools possible to protect the superior knowledge and products that set our industry apart."

Awaiting House

The House Judiciary Committee has yet to act on a companion trade secrets bill, although it backed a similar measure in the previous Congress.

"Protecting American intellectual property from criminal theft by foreign agents remains a priority for the House Judiciary Committee," said Jessica Collins, spokesman for Chairman Bob Goodlatte, a Virginia Republican. "However, the committee has not yet announced a hearing or markup for the legislation."

Under current law, companies must rely on either federal law enforcement actions or state courts to combat trade secret misappropriation. A Senate Judiciary Committee report accompanying the bill cited studies estimating that trade secret theft costs companies as much as $480 billion a year. Sponsors including Coons have said the existing system is too cumbersome for companies that in some cases are taking on overseas corporations that have stolen secrets.

"American companies spend billions every year in research and development and in the creation of products we use every day," Senate Majority Leader Mitch McConnell said Monday on the Senate floor. "But some thieves would rather not go through the trouble of developing products themselves, they’d rather just steal the fruits of others’ creativity and innovation instead. That’s more than just wrong -- it puts American jobs and the American economy at risk."

The attempt to create a new federal civil remedy would leave state laws intact as an option.

Asset Seizures

The bill would also empower judges to seize assets to prevent the continued dissemination and misappropriation of trade secrets. Some lawyers had opposed that provision, which was narrowed in the Senate Judiciary Committee to be allowed only in "extraordinary circumstances."

"The bill balances the need for efficient recovery of a stolen trade secret with the rights of defendants and third parties," the committee said in a March 7 report on the bill. "Seizure orders must therefore minimize interruption to the business operations of third parties, protect the seized property from disclosure, and set a hearing date at the earliest possible time."

Hatch said he hoped passing the bill would serve as a springboard for other intellectual property measures, "including patent litigation reforms."

Companies that signed a letter last July backing the trade secrets bill included 3M Co., Boeing Co., Boston Scientific Corp., Caterpillar Inc., Eli Lilly and Co., General Electric Co., International Business Machines Corp., Johnson & Johnson, Microsoft Corp., Nike Inc., Pfizer Inc., Procter and Gamble Co., and United Technologies Corp.

Groups that signed included the Biotechnology Industry Organization, BSA|The Software Alliance, Medical Device Manufacturers Association, the National Association of Manufacturers, and the U.S. Chamber of Commerce.

The Intellectual Property Owners Association, National Small Business Association and
American Consumer Institute Center for Citizen Research are also among the groups backing it.

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