Economic Espionage Update: Protecting Trade Secrets Just Got Easier

“Congress enacted the [Economic Espionage Act of 1996] to provide ‘a systematic approach to the problem of economic espionage.’ The EEA was designed to reflect the increasing importance of ‘intangible assets’ like trade secrets in the ‘high-technology, information age,’ as well as the growing threat posed by the theft of such proprietary information and the inadequacy of existing federal laws to protect trade secrets.” (Skadden Arps)

In late December, 2012, President Obama signed into a law an amendment to the Economic Espionage Act (EEA) that should make it easier for businesses to obtain convictions when their trade secrets are stolen.

The EEA makes the theft of trade secrets, under certain conditions, a federal crime. But a recent lawsuit laid bare an important shortcoming in the EEA. From Skadden Arps:

“… Section 1832 [of the EEA] … requires that the trade secret ‘relate … to or [be] included in a product that is produced for or placed in interstate or foreign commerce…’. In April 2012, the Second Circuit reversed a conviction under the EEA after determining that the misappropriated trade secrets were not sufficiently related to a product produced for or placed in interstate or foreign commerce.”

The new amendment fixes that shortcoming. For your reference: three takeaways for businesses and entrepreneurs:

1. The EEA’s new broader definition of trade secrets closes an important loophole in the law:

“Now, a trade secret that is intended or actually used in interstate commerce is protected, as opposed to the EEA that only protected trade secrets when the product was produced for interstate commerce… Under the EEA, Aleynikov won on appeal because the software was not produced for interstate commerce, thus taking it outside of the dictates of the law.” (XpertHR)

2. Lawmakers are clearly committed to protecting the country’s IP:

“The Theft of Trade Secrets Clarification Act standing alone is significant. That it was enacted in a political era marked by partisanship and the ‘fiscal cliff’ by a lame-duck Congress during a holiday consumed by fiscal cliff negotiations makes it all the more remarkable. These circumstances underscore the federal government’s continued commitment to protecting the intellectual property of U.S. businesses and entrepreneurs.” (Orrick)

3. The new law can be a double-edged sword:

“… the broad scope of the EEA applies to more than just intentional theft and, broadly applied, may become a significant hazard for companies that legitimately receive the confidential information of another. In civil litigation, for example, many defendants are surprised to learn that activities they believed were lawful methods for gathering business intelligence or research and development leads may in fact constitute acts of trade secret misappropriation.” (Skadden Arps)

The updates:

Find related law news on JD Supra>>