Why Protecting Our Trade Secrets Is Essential To Saving the Economy

By: Congressmen Hakeem Jeffries (D-NY), Howard Coble (R-NC), John Conyers Jr. (D-MI), Steve Chabot (R-OH), Jerrold Nadler (D-NY), and George Holding (R-NC), Members of the House Judiciary Committee

Unlike a patent or copyright, a trade secret is non-public intellectual property. It gains economic value because of its secrecy. Some of the most recognized trade secrets include Coca-Cola’s formula and KFC’s famous recipe, but trade secrets include many different types of confidential business information critical to the success of both large and small companies in the United States. The devastating reality is that theft of trade secrets costs the American economy billions of dollars per year.¹ Although criminal laws exist to combat such theft, the FBI [Federal Bureau of Investigation] said in a recent Congressional hearing that “[p]rotecting the nation’s economy from this threat is not something the FBI can accomplish on its own.”²

Trade secret owners take reasonable measures to keep this information out of the public eye because once it is disclosed, its protection is gone forever. According to the Office of the National Counterintelligence Executive, “trade secrets are all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether stored or unstored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing...”³ While some trade secrets might be eligible for other types of intellectual property protection, many involving the methods and processes necessary to create products are not.

In February 2013, the Executive Office of the President released a report documenting the scope of trade secret theft which showed serious cause for concern. The report first states that, “[e]merging trends indicate that the pace of economic espionage and trade secret theft against U.S. corporations is accelerating”⁴ including many recent attacks originating from foreign governments. Second, the report gives examples of the magnitude of trade secret theft to individual companies (such as theft of Ford’s trade secret valued at $50 million,⁵ theft of a Goldman Sachs trade secret valued at $500 million,⁶ a stolen Dupont trade secret valued at $400 million⁷) but one may conclude that trade secret theft in the U.S. is vast, and possibly too great to quantify.

Protection for trade secrets in the U.S. is currently accomplished through a patchwork of Federal criminal law and state civil statutes. Criminal cases are prosecuted by the FBI.⁸ While significant resources have been dedicated to the FBI for trade secret theft in recent years, “the number of economic espionage and theft of trade secrets cases overseen by the unit increased by more than 60 percent”⁹ between 2009 and 2013. American businesses own an estimated $5 trillion dollars of trade secrets, with roughly $300 billion of that stolen per year.¹⁰ At this rate, a criminal cause of action alone is not enough.

That is why we introduced the “Trade Secrets Protection Act of 2014” to create a civil cause of action that allows trade secret owners to directly combat theft of their intellectual property in federal court. Our bill will provide U.S. companies with additional tools to combat destructive threats to valuable information.

While state laws may have been effective in the past, the digital information age has changed the dynamic of trade secret theft.¹¹ Theft of proprietary information is no longer only physical misappropriation, but now may include hundreds of files downloaded onto a flash drive or sent around the world instantaneously. Moreover, not all state laws are identical, nor are state court procedures, which adds to the complexity of seeking remedies in this venue. Instead, expanding the venue of civil trade secret actions to federal court will foster the development of a national standard for use by businesses of all types and sizes to protect their intellectual property.

The current patchwork is simply not enough to combat organized trade secret theft. All other forms of intellectual property – patents, copyrights, and trademarks – are afforded a civil cause of action in federal law. It is time we confer trade secrets with a similar level of protection to substantially mitigate the billions of dollars lost annually through theft of our intellectual property.

^{1. Economic Espionage and Trade Secret Theft: Are Our Laws Adequate for Today’s Threats?: Hearing Before the Subcomm. on Crime and Terrorism of the S. Comm. on the Judiciary, 113th Cong. 1 (2014) (statement of Randall C. Coleman, Assistant Director, Counterintelligence Division, Federal Bureau of Investigation).}

^{2. Economic Espionage and Trade Secret Theft: Are Our Laws Adequate for Today’s Threats?: Hearing Before the Subcomm. on Crime and Terrorism of the S. Comm. on the Judiciary, 113th Cong. 4 (2014) (statement of Randall C. Coleman, Assistant Director, Counterintelligence Division, Federal Bureau of Investigation).}

^{3. OFFICE OF THE NATIONAL COUNTERINTELLIGENCE EXECUTIVE (ONCIX), FOREIGN SPIES STEALING US ECONOMIC SECRETS IN CYBERSPACE, REPORT TO CONGRESS ON FOREIGN ECONOMIC COLLECTION AND INDUSTRIAL ESPIONAGE, 2009-2011 (2011).}

^{4. EXECUTIVE OFFICE OF THE PRESIDENT OF THE UNITED STATES, ADMINISTRATION STRATEGY ON MITIGATING THE THEFT OF U.S. TRADE SECRETS 1 (2013). See also OFFICE OF THE NATIONAL COUNTERINTELLIGENCE EXECUTIVE (ONCIX), FOREIGN SPIES STEALING US ECONOMIC SECRETS IN CYBERSPACE, REPORT TO CONGRESS ON FOREIGN ECONOMIC COLLECTION AND INDUSTRIAL ESPIONAGE, 2009-2011 (2011).}

^{5. EXECUTIVE OFFICE OF THE PRESIDENT OF THE UNITED STATES, ADMINISTRATION STRATEGY ON MITIGATING THE THEFT OF U.S. TRADE SECRETS 4 (2013).}

^{6. EXECUTIVE OFFICE OF THE PRESIDENT OF THE UNITED STATES, ADMINISTRATION STRATEGY ON MITIGATING THE THEFT OF U.S. TRADE SECRETS 12 (2013).}

^{7. EXECUTIVE OFFICE OF THE PRESIDENT OF THE UNITED STATES, ADMINISTRATION STRATEGY ON MITIGATING THE THEFT OF U.S. TRADE SECRETS 5 (2013).}

^{8. The FBI currently protects trade secrets through the Economic Espionage Act of 1996 (EEA), which is codified in 18 U.S.C. §§ 1831-32.}

^{9. Economic Espionage and Trade Secret Theft: Are Our Laws Adequate for Today’s Threats?: Hearing Before the Subcomm. on Crime and Terrorism of the S. Comm. on the Judiciary, 113th Cong. 2 (2014) (statement of Randall C. Coleman, Assistant Director, Counterintelligence Division, Federal Bureau of Investigation).}

^{10. The Case for Enhanced Protection of Trade Secrets in the Trans-Pacific Partnership Agreement, U.S. Chamber of Commerce, 10-12, available at https://www.uschamber.com/sites/default/files/legacy/international/files/Final%20TPP%20Trade%20Secrets%208_ 0.pdf.}

^{11. See NCCUSL, Uniform Trade Secrets Act, available at http://homepages.law.asu.edu/~dkarjala/Copyright/UniformTradeSecretsAct(1985).pdf.}

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