[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.