[114th Congress Public Law 153]
[From the U.S. Government Publishing Office]
[[Page 375]]
DEFEND TRADE SECRETS ACT OF 2016
[[Page 130 STAT. 376]]
Public Law 114-153
114th Congress
An Act
To amend chapter 90 of title 18, United States Code, to provide Federal
jurisdiction for the theft of trade secrets, and for other
purposes. <<NOTE: May 11, 2016 - [S. 1890]>>
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, <<NOTE: Defend Trade
Secrets Act of 2016. 18 USC 1 note.>>
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Defend Trade Secrets Act of 2016''.
SEC. 2. FEDERAL JURISDICTION FOR THEFT OF TRADE SECRETS.
(a) In General.--Section 1836 of title 18, United States Code, is
amended by striking subsection (b) and inserting the following:
``(b) Private Civil Actions.--
``(1) In general.--An owner of a trade secret that is
misappropriated may bring a civil action under this subsection
if the trade secret is related to a product or service used in,
or intended for use in, interstate or foreign commerce.
``(2) Civil seizure.--
``(A) In general.--
``(i) Application.--Based on an affidavit or
verified complaint satisfying the requirements of
this paragraph, the court may, upon ex parte
application but only in extraordinary
circumstances, issue an order providing for the
seizure of property necessary to prevent the
propagation or dissemination of the trade secret
that is the subject of the action.
``(ii) Requirements for issuing order.--The
court may not grant an application under clause
(i) unless the court finds that it clearly appears
from specific facts that--
``(I) an order issued pursuant to
Rule 65 of the Federal Rules of Civil
Procedure or another form of equitable
relief would be inadequate to achieve
the purpose of this paragraph because
the party to which the order would be
issued would evade, avoid, or otherwise
not comply with such an order;
``(II) an immediate and irreparable
injury will occur if such seizure is not
ordered;
``(III) the harm to the applicant of
denying the application outweighs the
harm to the legitimate interests of the
person against whom seizure would be
ordered of granting the application and
[[Page 130 STAT. 377]]
substantially outweighs the harm to any
third parties who may be harmed by such
seizure;
``(IV) the applicant is likely to
succeed in showing that--
``(aa) the information is a
trade secret; and
``(bb) the person against
whom seizure would be ordered--
``(AA) misappropriated
the trade secret of the
applicant by improper means;
or
``(BB) conspired to use
improper means to
misappropriate the trade
secret of the applicant;
``(V) the person against whom
seizure would be ordered has actual
possession of--
``(aa) the trade secret; and
``(bb) any property to be
seized;
``(VI) the application describes
with reasonable particularity the matter
to be seized and, to the extent
reasonable under the circumstances,
identifies the location where the matter
is to be seized;
``(VII) the person against whom
seizure would be ordered, or persons
acting in concert with such person,
would destroy, move, hide, or otherwise
make such matter inaccessible to the
court, if the applicant were to proceed
on notice to such person; and
``(VIII) the applicant has not
publicized the requested seizure.
``(B) Elements of order.--If an order is issued
under subparagraph (A), it shall--
``(i) set forth findings of fact and
conclusions of law required for the order;
``(ii) provide for the narrowest seizure of
property necessary to achieve the purpose of this
paragraph and direct that the seizure be conducted
in a manner that minimizes any interruption of the
business operations of third parties and, to the
extent possible, does not interrupt the legitimate
business operations of the person accused of
misappropriating the trade secret;
``(iii)(I) be accompanied by an order
protecting the seized property from disclosure by
prohibiting access by the applicant or the person
against whom the order is directed, and
prohibiting any copies, in whole or in part, of
the seized property, to prevent undue damage to
the party against whom the order has issued or
others, until such parties have an opportunity to
be heard in court; and
``(II) provide that if access is granted by
the court to the applicant or the person against
whom the order is directed, the access shall be
consistent with subparagraph (D);
``(iv) provide guidance to the law enforcement
officials executing the seizure that clearly
delineates the scope of the authority of the
officials, including--
[[Page 130 STAT. 378]]
``(I) the hours during which the
seizure may be executed; and
``(II) whether force may be used to
access locked areas;
``(v) <<NOTE: Deadline. Notification.>> set a
date for a hearing described in subparagraph (F)
at the earliest possible time, and not later than
7 days after the order has issued, unless the
party against whom the order is directed and
others harmed by the order consent to another date
for the hearing, except that a party against whom
the order has issued or any person harmed by the
order may move the court at any time to dissolve
or modify the order after giving notice to the
applicant who obtained the order; and
``(vi) require the person obtaining the order
to provide the security determined adequate by the
court for the payment of the damages that any
person may be entitled to recover as a result of a
wrongful or excessive seizure or wrongful or
excessive attempted seizure under this paragraph.
``(C) <<NOTE: Courts.>> Protection from
publicity.--The court shall take appropriate action to
protect the person against whom an order under this
paragraph is directed from publicity, by or at the
behest of the person obtaining the order, about such
order and any seizure under such order.
``(D) Materials in custody of court.--
``(i) In general.--Any materials seized under
this paragraph shall be taken into the custody of
the court. The court shall secure the seized
material from physical and electronic access
during the seizure and while in the custody of the
court.
``(ii) Storage medium.--If the seized material
includes a storage medium, or if the seized
material is stored on a storage medium, the court
shall prohibit the medium from being connected to
a network or the Internet without the consent of
both parties, until the hearing required under
subparagraph (B)(v) and described in subparagraph
(F).
``(iii) Protection of confidentiality.--The
court shall take appropriate measures to protect
the confidentiality of seized materials that are
unrelated to the trade secret information ordered
seized pursuant to this paragraph unless the
person against whom the order is entered consents
to disclosure of the material.
``(iv) Appointment of special master.--The
court may appoint a special master to locate and
isolate all misappropriated trade secret
information and to facilitate the return of
unrelated property and data to the person from
whom the property was seized. The special master
appointed by the court shall agree to be bound by
a non-disclosure agreement approved by the court.
``(E) Service of order.--The court shall order that
service of a copy of the order under this paragraph, and
the submissions of the applicant to obtain the order,
shall be made by a Federal law enforcement officer who,
upon
[[Page 130 STAT. 379]]
making service, shall carry out the seizure under the
order. The court may allow State or local law
enforcement officials to participate, but may not permit
the applicant or any agent of the applicant to
participate in the seizure. <<NOTE: Determination.>> At
the request of law enforcement officials, the court may
allow a technical expert who is unaffiliated with the
applicant and who is bound by a court-approved non-
disclosure agreement to participate in the seizure if
the court determines that the participation of the
expert will aid the efficient execution of and minimize
the burden of the seizure.
``(F) Seizure hearing.--
``(i) Date.--A court that issues a seizure
order shall hold a hearing on the date set by the
court under subparagraph (B)(v).
``(ii) Burden of proof.--At a hearing held
under this subparagraph, the party who obtained
the order under subparagraph (A) shall have the
burden to prove the facts supporting the findings
of fact and conclusions of law necessary to
support the order. If the party fails to meet that
burden, the seizure order shall be dissolved or
modified appropriately.
``(iii) Dissolution or modification of
order.--A party against whom the order has been
issued or any person harmed by the order may move
the court at any time to dissolve or modify the
order after giving notice to the party who
obtained the order.
``(iv) Discovery time limits.--The court may
make such orders modifying the time limits for
discovery under the Federal Rules of Civil
Procedure as may be necessary to prevent the
frustration of the purposes of a hearing under
this subparagraph.
``(G) Action for damage caused by wrongful
seizure.--A person who suffers damage by reason of a
wrongful or excessive seizure under this paragraph has a
cause of action against the applicant for the order
under which such seizure was made, and shall be entitled
to the same relief as is provided under section
34(d)(11) of the Trademark Act of 1946 (15 U.S.C.
1116(d)(11)). The security posted with the court under
subparagraph (B)(vi) shall not limit the recovery of
third parties for damages.
``(H) Motion for encryption.--A party or a person
who claims to have an interest in the subject matter
seized may make a motion at any time, which may be heard
ex parte, to encrypt any material seized or to be seized
under this paragraph that is stored on a storage medium.
The motion shall include, when possible, the desired
encryption method.
``(3) Remedies.--In a civil action brought under this
subsection with respect to the misappropriation of a trade
secret, a court may--
``(A) grant an injunction--
``(i) to prevent any actual or threatened
misappropriation described in paragraph (1) on
such terms as the court deems reasonable, provided
the order does not--
[[Page 130 STAT. 380]]
``(I) prevent a person from entering
into an employment relationship, and
that conditions placed on such
employment shall be based on evidence of
threatened misappropriation and not
merely on the information the person
knows; or
``(II) otherwise conflict with an
applicable State law prohibiting
restraints on the practice of a lawful
profession, trade, or business;
``(ii) if determined appropriate by the court,
requiring affirmative actions to be taken to
protect the trade secret; and
``(iii) in exceptional circumstances that
render an injunction inequitable, that conditions
future use of the trade secret upon payment of a
reasonable royalty for no longer than the period
of time for which such use could have been
prohibited;
``(B) award--
``(i)(I) damages for actual loss caused by the
misappropriation of the trade secret; and
``(II) damages for any unjust enrichment
caused by the misappropriation of the trade secret
that is not addressed in computing damages for
actual loss; or
``(ii) in lieu of damages measured by any
other methods, the damages caused by the
misappropriation measured by imposition of
liability for a reasonable royalty for the
misappropriator's unauthorized disclosure or use
of the trade secret;
``(C) if the trade secret is willfully and
maliciously misappropriated, award exemplary damages in
an amount not more than 2 times the amount of the
damages awarded under subparagraph (B); and
``(D) if a claim of the misappropriation is made in
bad faith, which may be established by circumstantial
evidence, a motion to terminate an injunction is made or
opposed in bad faith, or the trade secret was willfully
and maliciously misappropriated, award reasonable
attorney's fees to the prevailing party.
``(c) Jurisdiction.--The district courts of the United States shall
have original jurisdiction of civil actions brought under this section.
``(d) Period of Limitations.--A civil action under subsection (b)
may not be commenced later than 3 years after the date on which the
misappropriation with respect to which the action would relate is
discovered or by the exercise of reasonable diligence should have been
discovered. For purposes of this subsection, a continuing
misappropriation constitutes a single claim of misappropriation.''.
(b) Definitions.--Section 1839 of title 18, United States Code, is
amended--
(1) in paragraph (3)--
(A) in subparagraph (B), by striking ``the public''
and inserting ``another person who can obtain economic
value from the disclosure or use of the information'';
and
(B) by striking ``and'' at the end;
(2) in paragraph (4), by striking the period at the end and
inserting a semicolon; and
(3) by adding at the end the following:
[[Page 130 STAT. 381]]
``(5) the term `misappropriation' means--
``(A) acquisition of a trade secret of another by a
person who knows or has reason to know that the trade
secret was acquired by improper means; or
``(B) disclosure or use of a trade secret of another
without express or implied consent by a person who--
``(i) used improper means to acquire knowledge
of the trade secret;
``(ii) at the time of disclosure or use, knew
or had reason to know that the knowledge of the
trade secret was--
``(I) derived from or through a
person who had used improper means to
acquire the trade secret;
``(II) acquired under circumstances
giving rise to a duty to maintain the
secrecy of the trade secret or limit the
use of the trade secret; or
``(III) derived from or through a
person who owed a duty to the person
seeking relief to maintain the secrecy
of the trade secret or limit the use of
the trade secret; or
``(iii) before a material change of the
position of the person, knew or had reason to know
that--
``(I) the trade secret was a trade
secret; and
``(II) knowledge of the trade secret
had been acquired by accident or
mistake;
``(6) the term `improper means'--
``(A) includes theft, bribery, misrepresentation,
breach or inducement of a breach of a duty to maintain
secrecy, or espionage through electronic or other means;
and
``(B) does not include reverse engineering,
independent derivation, or any other lawful means of
acquisition; and
``(7) the term `Trademark Act of 1946' means the Act
entitled `An Act to provide for the registration and protection
of trademarks used in commerce, to carry out the provisions of
certain international conventions, and for other purposes,
approved July 5, 1946 (15 U.S.C. 1051 et seq.) (commonly
referred to as the ``Trademark Act of 1946'' or the ``Lanham
Act'')'.''.
(c) Exceptions to Prohibition.--Section 1833 of title 18, United
States Code, is amended, in the matter preceding paragraph (1), by
inserting ``or create a private right of action for'' after
``prohibit''.
(d) Conforming Amendments.--
(1) The section heading for section 1836 of title 18, United
States Code, is amended to read as follows:
``Sec. 1836. Civil proceedings''.
(2) The table of sections for chapter 90 of title 18, United
States Code, <<NOTE: 18 USC 1831 prec.>> is amended by striking
the item relating to section 1836 and inserting the following:
``1836. Civil proceedings.''.
(e) <<NOTE: Applicability. 18 USC 1833 note.>> Effective Date.--The
amendments made by this section shall apply with respect to any
misappropriation of a trade secret (as defined in section 1839 of title
18, United States Code, as
[[Page 130 STAT. 382]]
amended by this section) for which any act occurs on or after the date
of the enactment of this Act.
(f) <<NOTE: 18 USC 1833 note.>> Rule of Construction.--Nothing in
the amendments made by this section shall be construed to modify the
rule of construction under section 1838 of title 18, United States Code,
or to preempt any other provision of law.
(g) <<NOTE: 18 USC 1833 note.>> Applicability to Other Laws.--This
section and the amendments made by this section shall not be construed
to be a law pertaining to intellectual property for purposes of any
other Act of Congress.
SEC. 3. TRADE SECRET THEFT ENFORCEMENT.
(a) In General.--Chapter 90 of title 18, United States Code, is
amended--
(1) in section 1832(b), by striking ``$5,000,000'' and
inserting ``the greater of $5,000,000 or 3 times the value of
the stolen trade secret to the organization, including expenses
for research and design and other costs of reproducing the trade
secret that the organization has thereby avoided''; and
(2) in section 1835--
(A) by striking ``In any prosecution'' and inserting
the following:
``(a) In General.--In any prosecution''; and
(B) by adding at the end the following:
``(b) Rights of Trade Secret Owners.--The court may not authorize or
direct the disclosure of any information the owner asserts to be a trade
secret unless the court allows the owner the opportunity to file a
submission under seal that describes the interest of the owner in
keeping the information confidential. No submission under seal made
under this subsection may be used in a prosecution under this chapter
for any purpose other than those set forth in this section, or otherwise
required by law. The provision of information relating to a trade secret
to the United States or the court in connection with a prosecution under
this chapter shall not constitute a waiver of trade secret protection,
and the disclosure of information relating to a trade secret in
connection with a prosecution under this chapter shall not constitute a
waiver of trade secret protection unless the trade secret owner
expressly consents to such waiver.''.
(b) RICO Predicate Offenses.--Section 1961(1) of title 18, United
States Code, is amended by inserting ``sections 1831 and 1832 (relating
to economic espionage and theft of trade secrets),'' before ``section
1951''.
SEC. 4. <<NOTE: 18 USC 1832 note.>> REPORT ON THEFT OF TRADE
SECRETS OCCURRING ABROAD.
(a) Definitions.--In this section:
(1) Director.--The term ``Director'' means the Under
Secretary of Commerce for Intellectual Property and Director of
the United States Patent and Trademark Office.
(2) Foreign instrumentality, etc.--The terms ``foreign
instrumentality'', ``foreign agent'', and ``trade secret'' have
the meanings given those terms in section 1839 of title 18,
United States Code.
(3) State.--The term ``State'' includes the District of
Columbia and any commonwealth, territory, or possession of the
United States.
[[Page 130 STAT. 383]]
(4) United states company.--The term ``United States
company'' means an organization organized under the laws of the
United States or a State or political subdivision thereof.
(b) <<NOTE: Consultation. Public information. Web posting.>>
Reports.--Not later than 1 year after the date of enactment of this Act,
and biannually thereafter, the Attorney General, in consultation with
the Intellectual Property Enforcement Coordinator, the Director, and the
heads of other appropriate agencies, shall submit to the Committees on
the Judiciary of the House of Representatives and the Senate, and make
publicly available on the Web site of the Department of Justice and
disseminate to the public through such other means as the Attorney
General may identify, a report on the following:
(1) The scope and breadth of the theft of the trade secrets
of United States companies occurring outside of the United
States.
(2) The extent to which theft of trade secrets occurring
outside of the United States is sponsored by foreign
governments, foreign instrumentalities, or foreign agents.
(3) The threat posed by theft of trade secrets occurring
outside of the United States.
(4) The ability and limitations of trade secret owners to
prevent the misappropriation of trade secrets outside of the
United States, to enforce any judgment against foreign entities
for theft of trade secrets, and to prevent imports based on
theft of trade secrets overseas.
(5) A breakdown of the trade secret protections afforded
United States companies by each country that is a trading
partner of the United States and enforcement efforts available
and undertaken in each such country, including a list
identifying specific countries where trade secret theft, laws,
or enforcement is a significant problem for United States
companies.
(6) Instances of the Federal Government working with foreign
countries to investigate, arrest, and prosecute entities and
individuals involved in the theft of trade secrets outside of
the United States.
(7) Specific progress made under trade agreements and
treaties, including any new remedies enacted by foreign
countries, to protect against theft of trade secrets of United
States companies outside of the United States.
(8) <<NOTE: Recommenda- tions.>> Recommendations of
legislative and executive branch actions that may be undertaken
to--
(A) reduce the threat of and economic impact caused
by the theft of the trade secrets of United States
companies occurring outside of the United States;
(B) educate United States companies regarding the
threats to their trade secrets when taken outside of the
United States;
(C) provide assistance to United States companies to
reduce the risk of loss of their trade secrets when
taken outside of the United States; and
(D) provide a mechanism for United States companies
to confidentially or anonymously report the theft of
trade secrets occurring outside of the United States.
SEC. 5. SENSE OF CONGRESS.
It is the sense of Congress that--
[[Page 130 STAT. 384]]
(1) trade secret theft occurs in the United States and
around the world;
(2) trade secret theft, wherever it occurs, harms the
companies that own the trade secrets and the employees of the
companies;
(3) chapter 90 of title 18, United States Code (commonly
known as the ``Economic Espionage Act of 1996''), applies
broadly to protect trade secrets from theft; and
(4) it is important when seizing information to balance the
need to prevent or remedy misappropriation with the need to
avoid interrupting the--
(A) business of third parties; and
(B) legitimate interests of the party accused of
wrongdoing.
SEC. 6. <<NOTE: 28 USC 620 note.>> BEST PRACTICES.
(a) <<NOTE: Deadline.>> In General.--Not later than 2 years after
the date of enactment of this Act, the Federal Judicial Center, using
existing resources, shall develop recommended best practices for--
(1) the seizure of information and media storing the
information; and
(2) the securing of the information and media once seized.
(b) Updates.--The Federal Judicial Center shall update the
recommended best practices developed under subsection (a) from time to
time.
(c) <<NOTE: Records.>> Congressional Submissions.--The Federal
Judicial Center shall provide a copy of the recommendations developed
under subsection (a), and any updates made under subsection (b), to
the--
(1) Committee on the Judiciary of the Senate; and
(2) Committee on the Judiciary of the House of
Representatives.
SEC. 7. IMMUNITY FROM LIABILITY FOR CONFIDENTIAL DISCLOSURE OF A
TRADE SECRET TO THE GOVERNMENT OR IN A COURT
FILING.
(a) Amendment.--Section 1833 of title 18, United States Code, is
amended--
(1) by striking ``This chapter'' and inserting ``(a) In
General.--This chapter'';
(2) in subsection (a)(2), as designated by paragraph (1), by
striking ``the reporting of a suspected violation of law to any
governmental entity of the United States, a State, or a
political subdivision of a State, if such entity has lawful
authority with respect to that violation'' and inserting ``the
disclosure of a trade secret in accordance with subsection
(b)''; and
(3) by adding at the end the following:
``(b) Immunity From Liability for Confidential Disclosure of a Trade
Secret to the Government or in a Court Filing.--
``(1) Immunity.--An individual shall not be held criminally
or civilly liable under any Federal or State trade secret law
for the disclosure of a trade secret that--
``(A) is made--
``(i) in confidence to a Federal, State, or
local government official, either directly or
indirectly, or to an attorney; and
``(ii) solely for the purpose of reporting or
investigating a suspected violation of law; or
[[Page 130 STAT. 385]]
``(B) is made in a complaint or other document filed
in a lawsuit or other proceeding, if such filing is made
under seal.
``(2) Use of trade secret information in anti-retaliation
lawsuit.--An individual who files a lawsuit for retaliation by
an employer for reporting a suspected violation of law may
disclose the trade secret to the attorney of the individual and
use the trade secret information in the court proceeding, if the
individual--
``(A) files any document containing the trade secret
under seal; and
``(B) does not disclose the trade secret, except
pursuant to court order.
``(3) Notice.--
``(A) <<NOTE: Contracts.>> In general.--An employer
shall provide notice of the immunity set forth in this
subsection in any contract or agreement with an employee
that governs the use of a trade secret or other
confidential information.
``(B) Policy document.--An employer shall be
considered to be in compliance with the notice
requirement in subparagraph (A) if the employer provides
a cross-reference to a policy document provided to the
employee that sets forth the employer's reporting policy
for a suspected violation of law.
``(C) Non-compliance.--If an employer does not
comply with the notice requirement in subparagraph (A),
the employer may not be awarded exemplary damages or
attorney fees under subparagraph (C) or (D) of section
1836(b)(3) in an action against an employee to whom
notice was not provided.
``(D) <<NOTE: Contracts.>> Applicability.--This
paragraph shall apply to contracts and agreements that
are entered into or updated after the date of enactment
of this subsection.
``(4) Employee defined.--For purposes of this subsection,
the term `employee' includes any individual performing work as a
contractor or consultant for an employer.
``(5) Rule of construction.--Except as expressly provided
for under this subsection, nothing in this subsection shall be
construed to authorize, or limit liability for, an act that is
otherwise prohibited by law, such as the unlawful access of
material by unauthorized means.''.
(b) Technical and Conforming Amendment.--Section 1838 of title 18,
United States Code, is amended by striking ``This
[[Page 130 STAT. 386]]
chapter'' and inserting ``Except as provided in section 1833(b), this
chapter''.
Approved May 11, 2016.
LEGISLATIVE HISTORY--S. 1890:
---------------------------------------------------------------------------
HOUSE REPORTS: No. 114-529 (Comm. on the Judiciary).
SENATE REPORTS: No. 114-220 (Comm. on the Judiciary).
CONGRESSIONAL RECORD, Vol. 162 (2016):
Apr. 4, considered and passed Senate.
Apr. 27, considered and passed House.
DAILY COMPILATION OF PRESIDENTIAL DOCUMENTS (2016):
May 11, Presidential remarks.
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