Rep. Nadler Praises Passage of the Defend Trade Secrets Act

Apr 20, 2016 Issues: Civil Liberties, Jobs, Labor and the Economy

WASHINGTON, D.C. -- Congressman Jerrold Nadler (NY-10), Ranking Member of the House Judiciary Subcommittee on the Courts, Intellectual Property and the Internet, praised today’s passage by the House Judiciary Committee of S. 1890, the Defend Trade Secrets Act.  Rep. Nadler was the lead Democratic cosponsor of H.R. 3326, the House companion to the bill.

“I am pleased that the Judiciary Committee today passed the Defend Trade Secrets Act, and I was proud to be the lead Democratic cosponsor of the House companion bill," said Congressman Nadler. "As the United States continues to grow into a knowledge- and service-based economy, trade secrets are increasingly becoming the foundation of businesses across the country. Unfortunately, with such fortunes resting on trade secrets, theft of this valuable intellectual property is inevitable.  And in today’s digital environment, it has never been easier to transfer trade secrets across the globe with the click of a cell phone, tablet, or computer key. However, our current framework of federal criminal laws and state civil remedies has proven inadequate.  The Defend Trade Secrets Act would create a uniform federal civil cause of action for misappropriation of trade secrets.  This is strong legislation that carefully balances the rights of defendants and the needs of American businesses to protect their most valuable assets.”

The statement as delivered appears below:

"Thank you, Mr. Chairman, for holding this markup of S. 1890, the Defend Trade Secrets Act of 2016.  I also want to thank the Gentleman from Georgia, Mr. Collins, for introducing H.R. 3326, the House companion to this important legislation, which will create a federal civil cause of action for theft of trade secrets.  I was proud to join him as the lead Democratic cosponsor of H.R. 3326, and I appreciate everything that he, Mr. Jeffries, Ranking Member Conyers, and our Senate colleagues, particularly Senators Coons and Hatch, have done to get us to this point today.

"Mr. Chairman, trade secrets are proprietary business information that derive their value from being and remaining secret.  This includes secret recipes, software codes and manufacturing processes – information that, if disclosed, could prove ruinous to a company.  As the United States continues to grow into a knowledge- and service-based economy, trade secrets are increasingly becoming the foundation of businesses across the country, with one estimate placing the value of trade secrets in the U.S. at $5 trillion.

"Unfortunately, with such fortunes resting on trade secrets, theft of this valuable intellectual property is inevitable.  And in today’s digital environment, it has never been easier to transfer it across the globe with the click of a cell phone, tablet, or computer key.  By one estimate, the American economy loses annually as much as $300 billion or more due to misappropriation of trade secrets, leading to a loss of up to 2.1 million jobs each year.  The same report found that trade secret theft is a drag on U.S. economic growth and diminishes the incentive to innovate.

"With so much at stake, it is absolutely vital that the law include strong protections against theft of trade secrets.  However, our current framework of federal criminal laws and state civil remedies has proven inadequate to the job.  Under current law, the federal government may bring criminal prosecutions or request civil injunctive relief under the Economic Espionage Act.  While the EEA is an important tool in fighting trade secret theft, the Department of Justice has limited resources and is able to pursue only a very limited number of cases each year. For example, last year, the Department brought just 15 cases of criminal trade secret theft.  In addition, although prosecution does well at punishing perpetrators, it often falls short in compensating the victims.

"Today, a victim of misappropriation must turn to state law to sue for money damages.  47 states and the District of Columbia have enacted the Uniform Trade Secrets Act, while the other three states have a similar form of trade secret protection through different laws.  While this system has worked relatively well for local and intra-state disputes, it has not proven efficient or effective for incidents that cross state, and sometimes international, borders.  Once upon a time, trade secrets might be kept in a file cabinet somewhere, and would-be thieves would have to spirit away a physical copy, making it likely that they would be caught before crossing state lines.  But, today, trade secrets can be loaded onto a thumb drive and mailed out-of-state, or even sent electronically anywhere across the globe in an instant.

"Pursuing a defendant, and the evidence in dispute, across state lines presents a host of challenges for victims of trade secret theft, particularly when time is of the essence.  For example, it can be difficult to facilitate discovery, serve defendants and witnesses, or preserve evidence in a timely fashion when operating across multiple jurisdictions.  The need for a federal solution is clear.

"The Defend Trade Secrets Act would create a uniform federal civil cause of action for misappropriation of trade secrets.  It would also provide for expedited ex parte seizure of the property in question, but only in extraordinary circumstances, where necessary to preserve evidence or prevent dissemination.  

"The bill we are considering today represents the culmination of over two years of negotiation with various stakeholders and has strong bipartisan support.  H.R. 3326 has 155 cosponsors, including most of the members of this Committee, and S. 1890 has 65 cosponsors in the other body.  During the Senate Judiciary Committee’s markup, the bill was further improved to harmonize various provisions with the Uniform Trade Secrets Act, provide additional protections for defendants subject to ex parte seizure, preserve mobility of employees, and protect whistleblowers.

"This is strong legislation that carefully balances the rights of defendants and the needs of American businesses to protect their most valuable assets.  With a yes vote, we can send this on to the House floor, and then to the President for his signature.  I urge my colleagues to support the bill, and I yield back the balance of my time."

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