Trade Secrets and Economic Espionage

On April 29, 2014, U.S. Senators Orrin Hatch (R-Utah), the former Chairman and a current member of the Senate Judiciary Committee, and Chris Coons (D-Del.), a member of the Senate Judiciary Committee, introduced the Defend Trade Secrets Act of 2014 [the “DTSA”].  The DTSA is a bipartisan bill that proposes to amend the Economic Espionage Act of 1996 [the “EEA”] to create the first federal private right-of-action for theft of trade secrets.

Trade secret theft is on the rise.  According to Senators Hatch and Coons, theft of corporate trade secrets results in an estimated loss of $160 billion to $480 billion each year in the United States.  In this information age, trade secrets may be vulnerable to theft by a few keystrokes from a remote location, compared to the bygone era when trade secret theft may have required accessing and photocopying paper documents stored under lock and key.  Trade secrets are increasingly stolen at the direction of a foreign government or to benefit a foreign competitor.  “The intellectual property that drives the U.S. economy has never been more valuable, or more vulnerable,” according to Senator Coons.  “American companies are losing jobs because of the theft of trade secrets every day.”

Currently, trade secret misappropriation claims are generally brought under state laws.  Trade secret laws vary from state to state, which can create problems for trade secret owners and make it difficult for U.S. companies to develop uniform policies.  Although the EEA made trade secret theft a federal crime, federal criminal laws do not appear to have successfully stemmed the tide.  The Department of Justice brought only 25 cases of criminal trade secret theft in 2013.
 
The availability of a federal civil cause of action may harmonize U.S. trade secret law, enable companies to develop a unified set of nondisclosure policies with federal protection, create a uniform standard for trade secret misappropriation, and facilitate access to federal courts.  The DTSA bill would arm trade secret owners with federal rights and remedies, including:

• ex parte orders to preserve evidence and seize property;

• injunctions or royalties in lieu of an injunction;

• damages for actual loss plus unjust enrichment to the extent not compensated by an award of actual loss, or a reasonable royalty in lieu of damages measured by other methods; 

• potential treble damages for willful or malicious trade secret misappropriation; and

• reasonable attorney fees for willful and malicious misappropriation, bad faith claims of misappropriation, or motions to terminate an injunction made or opposed in bad faith.

Rapid changes in technology and increases in employee turnover in today’s job market warrant appropriate measures to preserve and protect trade secrets.  This federal legislation may help companies protect their valuable trade secrets, but trade secret owners will need to continue to rely on state laws for the time being.
 

Benefits of Utility Model Protection

Some countries have a form of patent protection for inventions which do not qualify for regular patent protection.  This type of patent—generally called a utility model, and sometimes known as a petty patent—has a lower standard of patentability than regular patents.  Utility models, in most applicable countries, must relate to apparatus and not to methods, and generally have a term of 10 years.

While the United States does provide for utility model protection, many countries have such protection, including Australia, Germany, China, Taiwan, Japan, Korea and other countries in Europe, South America and Africa.  Since the patentability standard for utility models is lower than for regular patents, utility model protection can often be obtained for incremental or small improvements where regular patent protection is not available.  Therefore, utility models present options for some level of patent protection rather than no patent protection at all.

In many countries with such protection, a utility model application can be filed after a regular patent application has been rejected or even after such an application has lapsed.  A regular patent application can often be converted to a utility model application, to provide an avenue for protection where regular patent protection appears doubtful.  In some countries, both regular and utility model patent applications can be filed concurrently to provide a hedge that some patent coverage will more likely be achieved.

Many countries have no substantive examination of utility model applications and thus utility model patents will be granted so long as the formalities of the application are met, including payment of applicable filing fees.  Where applicable, a benefit of utility models is the availability of a grace period (generally six months) in which to file for utility model protection after public use of an invention outside of the home country.  Such earlier use will normally bar regular patent protection.

Thus, utility models can provide opportunities for some level of patent protection in instances where a regular patent is not achievable.