[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[S. 1890 Enrolled Bill (ENR)]

        S.1890

                     One Hundred Fourteenth Congress

                                 of the

                        United States of America


                          AT THE SECOND SESSION

           Begun and held at the City of Washington on Monday,
           the fourth day of January, two thousand and sixteen


                                 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.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,
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 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--

                    ``(I) the hours during which the seizure may be 
                executed; and
                    ``(II) whether force may be used to access locked 
                areas;

                ``(v) 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) 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 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. 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--

                    ``(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:
        ``(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, is amended by striking the item relating to section 
    1836 and inserting the following:

``1836. Civil proceedings.''.

    (e) 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 amended by 
this section) for which any act occurs on or after the date of the 
enactment of this Act.
    (f) 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) 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. 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.
        (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) 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) 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--
        (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. BEST PRACTICES.
    (a) 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) 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
            ``(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) 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) 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 chapter'' and 
inserting ``Except as provided in section 1833(b), this chapter''.

                               Speaker of the House of Representatives.

                            Vice President of the United States and    
                                               President of the Senate.