Trade-Secret Thefts From Across The Globe Are Now Protectable With U.S. Civil Suits
Earlier this year, in Motorola Solutions, Inc. v. Hytera Communications Corp., [1] Judge Charles Norgle of the United States District Court for the Northern District of Illinois concluded that the Defend Trade Secrets Act (“DTSA”) [2] allows for extraterritorial damages in private civil suits for the theft of trade secrets. The Court became the first to make that determination for the DTSA, at least accompanied by any in-depth reasoning, [3] and its decision is likely to have far-reaching effects.
Background of the DTSA
The DTSA amended sections of the preexisting Economic Espionage Act of 1996 (EEA). [4] Prior to the DTSA’s enactment, the EEA operated, in part, to criminalize the theft of trade secrets, as well as allowing the Attorney General to institute limited civil proceedings to seek injunctive relief. [5] The EEA also expressly applies to conduct outside the United States, providing that the entire “chapter” could be applied extraterritorially as long as “the offender” was a citizen or permanent resident of the United State or a company organized under state or federal law, and at least one “act in furtherance of the offense was committed in the United States.” [6]
In 2016, Congress enacted the DTSA, which amended the EEA and added a private right of action for theft of trade secrets. [7] Now, “[a]n[y] owner of a trade secret that is misappropriated may bring a civil action . . . if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” [8] A successful plaintiff in such cases may receive an injunction; damages for actual loss, unjust enrichment, or a calculation of damages based on a reasonable royalty; and exemplary damages and attorney’s fees in instances where the defendant acted willfully and maliciously in misappropriating the trade secret. [9] The DTSA also added a definition of “misappropriation” that included acquisition, disclosure, or use of a trade secret by various improper means. [10]
The Opinion in Motorola Solutions
In Motorola Solutions, the Court applied the Supreme Court’s extraterritoriality framework adopted in RJR Nabisco, Inc. v. European Community, [11] and concluded that the DTSA met the Supreme Court’s test and could be applied extraterritorially (after also concluding that the DTSA’s own statutory prerequisites for extraterritoriality were also met). [12]
First, the Court concluded that the DTSA overcame the presumption against extraterritoriality. The Court noted that Congress did not intend the DTSA to change an existing interpretation of the EEA but rather created a new, private right of action and, therefore, the chapter amended by the DTSA should be read as an “intertwined,” “cohesive whole.” [13] Turning to the statute’s plain text, the Court conceded that § 1836(b), codifying Congress’s new private right of action, did not have any reference to extraterritorial conduct or application. But § 1837, unchanged by the DTSA, states that “[t]his chapter also applies to conduct occurring outside the United States if” certain conditions are met—the offender is a citizen of the United States or an organization organized under United States law, and that at least one act in furtherance of the offense was committed on American soil. [14] Because §§ 1836 and 1837 were in the same chapter, and § 1837 extended extraterritoriality to the entire chapter, the Court found this relevant to Congress’s intent to apply the civil cause of action internationally (if it met § 1837’s requirements).
Second, the Court determined that the requirements for extraterritorial application set out in § 1837 were met here. The Court concluded that “an act in furtherance of the offense was committed in the United States” when the Defendants “advertised, promoted, and marketed products embodying the allegedly stolen trade secrets domestically at numerous trade shows.” [15]
Third, the Court—in a bit of a belt-and-suspenders approach—held that, even if the DTSA did not provide the clear indication of congressional intent necessary for extraterritoriality, this case presented a permissible domestic application of the statute. [16] The Court noted that the “focus” of the DTSA, i.e., “the object of its solicitude,” is on the misappropriation of trade secrets, and the DTSA defines misappropriation to include the improper or nonconsensual “use of a trade secret.” [17] Here, the Plaintiffs presented evidence that some “use” of the allegedly stolen trade secrets had occurred domestically at trade shows and, therefore, applying the DTSA to the Defendants’ conduct would be proper even if Congress had not clearly expressed its intent that the DTSA have extraterritorial application. [18]
Future Implications of the Motorola Solutions Decision
Although the Court’s decision is still subject to appeal, if its interpretation of the DTSA stands, the door is now open for corporations to sue international competitors and their employees who abuse American trade secret protections. If nothing else, the DTSA is another weapon in a company’s arsenal to protect itself from theft and misuse of trade secrets. In the past, international trade-secret theft was only remediable by criminal prosecution, and then only if a company could convince the federal government to use some of its resources to prosecute the case. But now self-help is available and a civil suit, with corresponding discovery and possibility of damages, can be a strong cudgel against misappropriation. Even without filing a civil suit, the increased risk of civil damages (and precedent risk of being hauled into American court to defend against them) might serve as leverage against future misappropriations of companies’ trade secrets. With the economy becoming ever more global, it is at least comforting to know that the American courts will remain an effective tool in the continual fight to keep various forms of intellectual property protected.
[1] Motorola Solutions, Inc. v. Hytera Commc’ns Corp., No. 1:17-cv-1973, ___ F. Supp. 3d ___, 2020 WL 967944 (N.D. Ill. Jan. 31, 2020).
[2] Pub. L. 114–153, 130 Stat. 376, codified at 18 U.S.C. § 1836, et seq.
[3] See id. at *5 (compiling cases that assumed, without analysis, that § 1836’s private cause of action could apply extraterritorially).
[4] Pub. L. 104–294, 110 Stat. 3488, codified at 18 U.S.C. § 1831 et seq.
[5] See 18 U.S.C. § 1832, 1836 (2015).
[6] 18 U.S.C. § 1837.
[7] Id. at § 1836(b).
[8] 18 U.S.C. § 1836(b)(1).
[9] Id. at § 1836(b)(3).
[10] Id. at § 1839(5).
[11] RJR Nabisco, Inc. v. European Cmty., 136 S. Ct. 2090, 2096 (2016).
[12] Motorola Solutions, 2020 WL 967944 at *4–13. Though beyond the scope of this particular article, the Court also concluded that the Plaintiffs could “recover damages flowing from exploitation abroad of the domestic acts of [copyright] infringement” under the Copyright Act, but that the Illinois Trade Secret Act did not provide for extraterritorial application. Id. at *13–15.
[13] Id. at *4.
[14] 18 U.S.C. § 1837 (emphasis added).
[15] Motorola Solutions, 2020 WL 967944 at *9–11.
[16] See RJR Nabisco, Inc., 136 S. Ct. at 2101 (“If the statute is not extraterritorial, then at the second step we determine whether the case involves a domestic application of the statute, and we do this by looking to the statute’s ‘focus.’ If the conduct relevant to the statute’s focus occurred in the United States, then the case involves a permissible domestic application even if other conduct occurred abroad; but if the conduct relevant to the focus occurred in a foreign country, then the case involves an impermissible extraterritorial application regardless of any other conduct that occurred in U.S. territory.”).
[17] Id. at *12–13.
[18] Admittedly, however, the Court noted there would still be questions about which damages were permissible under the use-based theory, if it was forced to rely on the second step of the Supreme Court’s extraterritoriality test. Id. at *13. But the Court was able to side-step such difficult questions because of his prior conclusion that the private cause of action in the DTSA was intended to apply extraterritorially under the first step of the Supreme Court’s test.