Obama Administration strongly supports Defend Trade Secrets Act

By Gene Quinn
April 4, 2016

White HouseEarlier today the White House released a Statement of Administration Policy, which strongly supports passage of s. 1890, the Defend Trade Secrets Act of 2016 (DTSA). The  DTSA is authored by U.S. Senators Chris Coons (D-DE) and Orrin Hatch (R-UT) and cosponsored by nearly two-thirds of the Senate.

The Statement of Administration Policy relating to the DTSA reads as follows:

The Administration strongly supports Senate passage of S. 1890, the Defend Trade Secrets Act of 2016, and appreciates the bipartisan effort that led to the formulation of this bill. Effective protection of trade secrets promotes innovation that is the engine of the Nation’s economy and minimizes threats to American businesses, the U.S. economy, and national security interests.

S. 1890 would establish a Federal civil private cause of action for trade secret theft that would provide businesses with a more uniform, reliable, and predictable way to protect their valuable trade secrets anywhere in the country.

The Administration has placed high priority on mitigating and combating the theft of trade secrets, as exemplified in the Administration’s Joint Strategic Plan on Intellectual Property Enforcement, the Administration’s Strategy on Mitigating the Theft of U.S. Trade Secrets, and Executive Order 13694 authorizing sanctions on those who perpetrate cyber-enabled trade secret theft. S. 1890 would provide important protection to the Nation’s businesses and industries, including through the establishment of a Federal civil cause of action for trade secret misappropriation which would effectively build upon current Federal law and various State laws that have largely adopted the Uniform Trade Secrets Act. As such, the Administration strongly supports the Defend Trade Secrets Act of 2016 and looks forward to working with the Congress on this important piece of legislation as it moves through the legislative process.

The bill is also supported by a broad industry coalition that includes Adobe, AdvaMed, the Alliance of Automobile Manufacturers, the Association of Global Automakers, Inc., Biotechnology Industry Organization (BIO), The Boeing Company, Boston Scientific, BSA | The Software Alliance (BSA), Caterpillar Inc., Corning Incorporated, Eli Lilly and Company, General Electric, Honda, IBM, Illinois Tool Works Inc., Intel, The Intellectual Property Owners Association (IPO), International Fragrance Association, North America, Johnson & Johnson, Medtronic, Micron, National Alliance for Jobs and Innovation (NAJI), National Association of Manufacturers (NAM), NIKE, Pfizer, Philips, The Procter & Gamble Company, SAS, Siemens Corporation, Software & Information Industry Association (SIIA), U.S. Chamber of Commerce, and United Technologies Corporation.

In a letter dated December 2, 2015, sent to Senators Hatch, Coons and Flake, the aforementioned industry coalition wrote:

Trade secrets are an essential form of intellectual property. Trade secrets include information as broad-ranging as manufacturing processes, product development, industrial techniques, formulas, and customer lists. The protection of this form of intellectual property is critical to driving the innovation and creativity at the heart of the American economy. Companies in America, however, are increasingly the targets of sophisticated efforts to steal proprietary information, harming our global competitiveness.

Existing state trade secret laws are inadequate to address the interstate and international nature of trade secret theft today. Federal law protects trade secrets through the Economic Espionage Act of 1996 (“EEA”), which provides criminal sanctions for trade secret misappropriation. While the EEA is a critical tool for law enforcement to protect the clear theft of our intellectual property, U.S. trade secret owners also need access to a federal civil remedy and the full spectrum of legal options available to owners of other forms of intellectual property, such as patents, trademarks, and copyrights.

The Defend Trade Secrets Act will create a federal remedy that will provide a consistent, harmonized legal framework and help avoid the commercial injury and loss of employment that can occur when trade secrets are stolen. We are proud to support it.

With such widespread, bipartisan support in the Senate, backing of key industry groups, and now strong support by the Obama Administration, the DTSA seems virtually certain to pass the Senate.

If you ask me, federal trade secret legislation is long over due. We no longer have a regional or even an national economy, and we haven’t for quite some time. For even the smallest of small businesses the marketplace is global. With a truly international economy it doesn’t make sense to continue to have 50+ separate trade secret jurisdictions between and among the States and U.S. territories. Furthermore, with the increased erosion of patent rights over the past decade the creation of a federal trade secret right of action seems more important than ever.

For more on the Defend Trade Secrets Act please see:

 

UPDATED at 5:10pm ET on Monday, April 4, 2016.

 

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and founder of IPWatchdog.com. Gene is also a principal lecturer in the PLI Patent Bar Review Course and an attorney with Widerman Malek. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 22 Comments comments.

  1. Night Writer April 4, 2016 9:20 pm

    How could this affect employment contracts in California? Obama is lazy like Clinton was. Obama is being bought off just like Clinton. The analogy with deregulation is very strong.

  2. Paul Morinville April 5, 2016 12:25 am

    For one, I can’t help but think how this legislation can square with the 10th Amendment.

    For two, if we strengthen trade secrets while we weaken patent rights, we are sending our economy even further into the tank.

    Trade secrets were the only way to protect inventions prior to the patent system so were widely used primarily in trade guilds and monasteries. This kept others from building on top of these secreted inventions.

    The first metal lathe was invented to build pick proof locks. It was hidden in a locked basement for more than a decade and nobody could figure out how to make a competing lock. Finally, the employee who worked the lathe had a falling out with the owner and he started up a machine tool company. He based his protection on patents and virtually all of the major metal working tools we now know were developed in the next couple of years. Trade secrets slowed innovation and patents sped it up.

    A group of monks in the middle ages learned how to smelt iron to make it exceptionally strong. If you wanted strong iron you had to travel to the monastery and they would make it. The monks were sworn to secrecy and they kept their process secret for a hundred years under the penalty of sin. Finally someone else figured it out and high quality iron became a worldwide commodity.

    Trade guilds swore their apprentices to secrecy so they could keep their inventions hostage within their guild. This was one of the motivating reasons for trade guilds. Secreting these inventions meant they could keep the work for themselves because others could not copy.

    Now we have stripped software from patentable subject matter. Most trade secrets are software and most are buried in code and behind the firewalls of huge data centers. If you are a large multinational like Google, you certainly want this situation. But for all of the rest of the world it is a very bad thing.

    Never mind the call for harmonization. That is the call that the Pied Piper used the last time. This legislation is foolhardy and damaging.

  3. Night Writer April 5, 2016 3:55 am

    Wow, Paul. I think that is the first time I agree with one of your posts.

    I do not think that this should go forward without examples of how an employment contract could be re-written in CA in view of the new act.

    I read an article in a magazine for start-ups and what they said was the biggest problem this may cause is that employees are going to get locked to one company. They will not be able to move. Without a complete analysis of this the bill should not move forward.

  4. Night Writer April 5, 2016 3:59 am

    Wow, Paul. Great post. The analogy with monasteries is dead on. The Googles will be able to bully the employees to have to stay at one company and the Googles can simply shut-down the flow of information.

    You know, back when I started in programming in the early 1980’s that is exactly how it worked. You signed an employment contract that swore you to secrecy and companies would sue you if you talked about what you were doing. You were locked into working in one area. Of course, the companies want that power back. Patents freed everyone. It meant what you did you could talk about and what you did was the property of the company so you could move to anther company since what you did was public.

  5. Benny April 5, 2016 5:32 am

    Night,
    You mentioned that “You signed an employment contract that swore you to secrecy and companies would sue you if you talked about what you were doing. You were locked into working in one area.” I worked for an organization which had exactly that policy. It was a ministry of defence related place, and the work related to electronic counter-measures and secure military comms. A lot of innovation that happened there never became public. Point being, there might be good reasons for implementing the policy.

  6. Nancy Kramer April 5, 2016 7:41 am

    Benny,

    In the USA if one works on defense related software everything one works on is considered top secrete so it needs no further protection. It also can only we worked on by people with a top secrete clearance. Trade secretes are a private industry thing. Government at least in the USA does not need them to protect information that the government wants to keep secrete. A person can go to jail for revealing information the US government has classified as top secrete so trade secretes would never be used by the government.

  7. Paul Morinville April 5, 2016 9:35 am

    Night. Come on… you always agree with me. Sometimes you are just confused and it takes a while for you to understand.

  8. Gene Quinn April 5, 2016 9:43 am

    Night Writer-

    The claims that the DTSA will prevent employee movement are 100% false. If you read the bill the presumption is that employees will be able to move. There is a test more strict than the 4 part injunction test in place that in extraordinary circumstances a district court judge could order someone not to be able to take a job. Further, the DTSA prohibits “any injunction that would “prevent a person from accepting an offer of employment under conditions that avoid actual or threatened misappropriation.” Of course, this isn’t a departure from the current law except that it will make it harder for employees to be stopped. Under current law no employee can move and steal trade secrets and take them to a competitor.

    -Gene

  9. Night Writer April 5, 2016 10:33 am

    @5 Benny, my company was a pre-Internet database company that worked with stock trading companies.

  10. Night Writer April 5, 2016 10:39 am

    @8 Gene: “prevent a person from accepting an offer of employment under conditions that avoid actual or threatened misappropriation.”

    Look, I’ve lived this as an employee. The problem is what is yours and what is the company’s. What area can you work in? Typically, what happens to a person like me as a 24 year old is you work in a technical area building a system and you become very proficient in languages and systems. All your value is there. It takes a couple of years of hard work to get there. Then the problem is that you can’t use those skills in your next job without violating your employment contract. Plus, Google could do things like create their own languages that would take you a year or two to become proficient at and then you wouldn’t be able to use it if you left Google.

    Look, there is a lot of ways for clever lawyers to use this with the help of the company to lock you up or make it very expensive for you to leave the company.

  11. Night Writer April 5, 2016 10:44 am

    And, Gene, let’s not forget that the people this is targeted at will be young, fresh out of school, and very unsophisticated in law. To them the prospect of a lawsuit will be overwhelming. Plus, what about say a start-up. Will Google use their muscle to sue them for hiring people at Google? Will they use this to chill the hiring of their employees?

    Come on Gene. The question is how can a clever Google use this to lock down their employees. Google could go dark with patents if this is passed and start putting everything behind a firewall.

    I am not sure how this could be used. The only way to know is with a great attorney pretending to be working for Google and seeing how they could lock-down employees with the help of Google adjusting their tech and patent policy.

  12. Night Writer April 5, 2016 10:48 am

    And frankly I find this push for trade secret protection to be completely predictable (I said this was coming 5 years ago) and more disturbing than the AIA and IPRs–much more. It will target the young tech worker who is unsophisticated and vulnerable. (Yea Google!)

  13. xtian April 5, 2016 11:42 am

    @ Night

    “… become very proficient in languages and systems. All your value is there. It takes a couple of years of hard work to get there. Then the problem is that you can’t use those skills in your next job without violating your employment contract.”

    I call BS. You can use your skills in the next job – your skills as a software engineer, problem solver, and creative thinker. What you can’t do is take the code that you developed for your prior company and regurgitate it for you next employer.

  14. Night Writer April 5, 2016 12:31 pm

    @13 xtian: No. Xtian it is not just the code, but using what you know. Code can be re-created easily by someone that just wrote it. It is the expertise in an area of the things you did that would formerly be patent applications. It is working in a technical area that can take years to get good at. So, if you are saying yes you can go and get another job where you were working on expert systems for help lines and then go and work on operating systems with c code. Sure you can.

    Do you get what this does is expand the protection of what you were working on? Before the patents would capture what you did that was inventive, but now the area will be much larger. And the big thing is also vague because it would not be written into a patent application. As well the people will not be able to go public with what they do as they do now.

    Xtian you just took a cheap shot and did not address the real issues. I am going to call shill.

  15. Xtian April 5, 2016 1:08 pm

    @Night
    Some states have adopted the Restatement of Unfair Competition almost verbatim, which is (upon brief review) very similar to the provisions in this proposed Act. So for these states, there is no expansion of trade secret law. Please correct me if my understanding is wrong. My intent was not to take a cheap shot.

  16. Night Writer April 5, 2016 1:19 pm

    @15 Xtian: but CA is not one of those states. I think anyone that has a sophisticated understanding of this area should be terrified of this bill.

    And, a lot of the reasoning that goes into this can’t be summed up in a sound bite. For example, the reality is that right now Google is using patents, but what if they decide post stronger trade secret to close down the disclosures. You see, the situation is very dynamic and stronger trade secret law definitely weakens the advantages of patents.

    And, anyone that has worked as a software engineer with these hot shot companies knows that they want to lock you down. I had many friends who worked for all the top companies in the 1980’s. Life has gotten much, much better because of software patents.

  17. xtian April 5, 2016 2:28 pm

    @16 Night

    I think Google is already relying more on trade secrets. Isn’t the interwebs flush with the accusations that Google has been pushing the AIA and agrees with recent Alice decisions. Your nightmare situation is already happening. No more patent protection. Strengthen trade secret protection. The result: restraint of trade (i.e., employee mobility). All perpetrated by the very same software companies that employ coders like you.

    So what’s the fix? The USPTO? Rescind TS law? I certainly don’t know….

  18. Night Writer April 5, 2016 3:16 pm

    @17 I was a software engineer not a coder. People who design systems and code parts of them are not coders. Now I am a patent attorney. The problem is that Google is pouring money into K Street second only to Goldman Sachs. They can do it year after year.

    The analogy with what happened in finance is a very good one. Behind all this too is the fact that Google is flush with money because of their near monopoly.

  19. Night Writer April 5, 2016 3:17 pm

    And @17, my prediction for years is that we are going to lose. Patents are headed out as we know them. Google may think that it can defeat any patent with IPRs and shell companies.

  20. angry dude April 6, 2016 12:19 am

    So, take your pick:

    patents OR trade secrets

    in many fields you just can’t have both…

  21. cdw April 7, 2016 11:14 am

    What is interesting in support of the discussion herein above, is the observation, of what Google is apparently doing in the pursuit of their present current patent portfolio. It would appear they now routinely request withholding their applications from publication, which may be observed by looking at their issuances. That means (as will be well understood here) that all matters in the prosecution of such applications is kept secret until such time as the application is allowed and issues. If it does not issue then it stays secret. The trade-off is they cannot foreign file. Not a trade-off that most corporations, particularly on their global scale, ever-ever make! It’s an interesting IP policy position for them to take, yes/no?

  22. Night Writer April 7, 2016 4:36 pm

    CDW @21: a bit interesting. It is funny in some ways. Everything computer is so easy and should be shared, but apparently not their computer inventions.

    You know, when the AIA was legislation there was not the awareness of what it was going to do by most. I became aware of it because I did a talk on the AIA and the more I dug into the legislation the more I realized that it was going to profoundly affect patents.

    Trade secrets are the same in that people don’t seem to get that companies like Google could turn everything into a trade secret to lock down their employees an guard their secrets. Not sure why other people can’t understand this. I interviewed at the supposedly best IP firm in the world and the top partners there laughed at me when I told them the profound affects IPRs would have on patents and told them that IPR would become one of the most important practices at their firm. I think this trade secret stuff is the same. No one is going to believe it until a big tech company goes dark.

    (If Google figures they can take out any patent with an IPR or multiple IPRs, then they may go dark.)