Posternak Blankstein & Lund LLP is now Arent Fox. Read the press release

The Obama Administration releases its “Administration Strategy on Mitigating the Theft of U.S. Trade Secrets”

“Trade secret theft threatens American businesses, undermines national security, and places the security of the U.S. economy in jeopardy,” a report by the Obama Administration stated last week.  The report is entitled “Administration Strategy on Mitigating the Theft of U.S. Trade Secrets,” and it underscores the national and international prominence that trade secrets have taken in recent years and sets forth goals for both the public and private sector to protect one of America’s most valued resources, its trade secrets.

It begins by summing up America’s dedication to protecting the trade secrets of its businesses and industries with a quote from President Obama:

“We are going to aggressively protect our intellectual property. Our single greatest asset is the innovation and the ingenuity and creativity of the American people. It is essential to our prosperity and it will only become more so in this century.”

The report is peppered with some of the most shocking trade secret misappropriation cases that have been reported over the past two years, including the theft of hybrid technology from GM and the theft of trade secrets from Ford Motor Company, Motorola, Goldman Sachs and DuPont, among others.  It acknowledges that emerging trends indicate that the pace of economic espionage and trade secret theft against U.S. corporations is accelerating, admits that there are multiple vectors of attack for trade secret thefts, from hackers to seemingly loyal employees to foreign governments and militaries buying secrets, and states that American interests—from U.S. Companies, law firms and academia, to financial institutions—are increasingly experiencing cyber intrusion activity against electronic repositories containing trade secret information.

In this report, the Obama Administration calls for the government to build on the two important pieces of legislation Congress passed last year to protect American trade secrets, based on the Office of U.S. Intellectual Property Enforcement’s (IPEC) 2011 White Paper on Intellectual Property Enforcement Legislative Recommendations (White Paper). They are:

  • Public Law 112-236—The Theft of Trade Secrets Clarification Act of 2012 (S. 3642), which closed a loophole in the Economic Espionage Act that had allowed the theft of valuable trade secret source code. This legislation was introduced by Senate Judiciary Chairman Senator Patrick Leahy in response to the Second Circuit decision in United States v. Aleynikov, 676 F.3d 71 (2d Cir. 2012), which overturned a verdict that found that the defendant violated 18 U.S.C. § 1832(a) by stealing proprietary computer code, a trade secret, from his employer.  This legislation was in line with the overall (IPEC) objective of protecting trade secrets from misappropriation; and
  • Public Law 112-269—The Foreign and Economic Espionage Penalty Enhancement Act of 2012 (H.R. 6029/S. 678), which bolstered criminal penalties for economic espionage and directed the Sentencing Commission to consider increasing offense levels for trade secret crimes.  Its passage is an important step in ensuring that penalties are commensurate with the economic harm inflicted on trade secret owners. 

We previously wrote about the passage of these two Acts here.

Last week’s report was a collaborative effort of several government branches and agencies, including the Departments of Justice, Commerce, Defense, Homeland Security, Treasury and State, the Office of National Intelligence and the Office of the U.S. Trade Representative. It contains five strategic action items:

  • Focus diplomatic efforts to protect trade secrets overseas through sustained and coordinated international engagements with trading partners, trade policy tools, international law enforcement cooperation, international training and capacity building, and international organizations;
  • Promote voluntary best practices by private industry to protect trade secrets by having the IPEC work closely with appropriate U.S. government agencies to facilitate best practices;
  • Enhance domestic law enforcement operations by increasing the number of investigations and prosecutions of trade secret theft by the Department of Justice, expanding the role of the FBI to fight computer intrusions that involve the theft of trade secrets by individual, corporate and nation-state cyber hackers and promoting more information sharing among government agencies and by government agencies to the private sector through the Office of the Director of National Intelligence;
  • Improve domestic legislation with recommendations from the IPEC; and
  • Public awareness and stakeholder outreach by leveraging the Commerce Department’s existing resources, like to provide useful information for the private sector such as general information on the threat of trade secret theft, expanded country-specific toolkits with information on how to protect trade secrets in priority markets, developments in the laws and enforcement practices of significant trading partners and webinars on trade secret theft awareness, increased focus on trade secret protection and theft in the U.S. Patent and Trademark Office and International Trade Administration “road show” trainings, and FBI public outreach.

While the report did not directly recommend the passage of the Protecting American Trade Secrets and Innovation Act of 2012 (PATSIA), that would create a private right of action for trade secret theft, it does promote improved domestic legislation and indicated that the IPEC will initiate and coordinate a process to determine if legislative changes are needed to enhance enforcement against trade secret theft.  This might include a recommendation in favor of a civil trade secrets law, which in this era of stretched government resources may lead to a real increase in the protection of trade secrets.

For more information on recent developments in trade secret law at the state and federal level and advice on how to protect your trade secrets, contact Jerry Abeles.


Continue Reading