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Congress Approves Legislation to Protect Trade Secrets

The House of Representatives approved by a 410-2 vote on 27 April legislation (S. 1890) to strengthen efforts to combat the theft of trade secrets by allowing companies to defend their trade secrets (customer lists, algorithms, software codes, unique designs, industrial techniques, food recipes, etc.) in federal court. The White House has said it “strongly supports” this measure and President Obama is expected to sign it into law shortly.

This bill creates a federal civil cause of action for trade secret misappropriation that models the Uniform Trade Secrets Act. A cause of action requires a showing of acquisition of a trade secret by improper means and disclosure or use of a trade secret by a person who had reason to know it was acquired by improper means or under circumstances giving rise to a duty of secrecy.

Additionally, in extraordinary circumstances a court may order an ex parte seizure based on the requisite showing that such an order is necessary to prevent destruction of evidence or dissemination of the trade secret. A court-ordered seizure must provide for the narrowest seizure necessary, that is least burdensome to the subject and that allows the accused to seek damages in case of wrongful or excessive seizure.

The bill also authorises the award of damages to trade secret owners consistent with the Uniform Trade Secrets Act, including enhanced damages for wilful and malicious misappropriation. It also establishes economic espionage and trade secret misappropriation as RICO predicate offenses.

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