    [Senate Hearing 114-881]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-881

                      PROTECTING TRADE SECRETS: THE IMPACT
                       OF TRADE SECRET THEFT ON AMERICAN
                         COMPETITIVENESS AND POTENTIAL
                         SOLUTIONS TO REMEDY THIS HARM

    =======================================================================

                                    HEARING

                                   before the

                           COMMITTEE ON THE JUDICIARY
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 FIRST SESSION
                                   __________

                                DECEMBER 2, 2015
                                   __________

                              Serial No. J-114-42
                                   __________

             Printed for the use of the Committee on the Judiciary

                   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                            www.judiciary.senate.gov
                                www.govinfo.gov

                                    ------

                      U.S. GOVERNMENT PUBLISHING OFFICE

    52-555                    WASHINGTON : 2025

                           COMMITTEE ON THE JUDICIARY

                      CHARLES E. GRASSLEY, Iowa, Chairman
    ORRIN G. HATCH, Utah                 PATRICK J. LEAHY, Vermont, Ranking
    JEFF SESSIONS, Alabama                 Member
    LINDSEY O. GRAHAM, South Carolina    DIANNE FEINSTEIN, California
    JOHN CORNYN, Texas                   CHARLES E. SCHUMER, New York
    MICHAEL S. LEE, Utah                 RICHARD J. DURBIN, Illinois
    TED CRUZ, Texas                      SHELDON WHITEHOUSE, Rhode Island
    JEFF FLAKE, Arizona                  AMY KLOBUCHAR, Minnesota
    DAVID VITTER, Louisiana              AL FRANKEN, Minnesota
    DAVID PERDUE, Georgia                CHRISTOPHER A. COONS, Delaware
    THOM TILLIS, North Carolina          RICHARD BLUMENTHAL, Connecticut

          Kolan L. Davis, Republican Chief Counsel and Staff Director
          Kristine Lucius, Democratic Chief Counsel and Staff Director

                                C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page

    Grassley, Hon. Charles E.........................................     1
        Prepared statement...........................................    31
    Leahy, Hon. Patrick J............................................     3
        Prepared statement...........................................    33

                                   WITNESSES

    Beall, Thomas R..................................................     6
        Prepared statement...........................................    35
        Responses to written questions...............................    93
    Cochran, Karen...................................................     4
        Prepared statement...........................................    41
        Responses to written questions...............................    98
    Pooley, James....................................................     9
        Prepared statement...........................................    47
        Responses to written questions...............................   104
    Sandeen, Sharon K................................................     8
        Prepared statement...........................................    86
        Responses to written questions...............................   112

                                    APPENDIX

    Items submitted for the record...................................   125

                      PROTECTING TRADE SECRETS: THE IMPACT
                       OF TRADE SECRET THEFT ON AMERICAN
                         COMPETITIVENESS AND POTENTIAL
                         SOLUTIONS TO REMEDY THIS HARM

                                  ----------

                          WEDNESDAY, DECEMBER 2, 2015

                                  United States Senate,
                                    Committee on the Judiciary,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 10:07 a.m., in
    Room 226, Dirksen Senate Office Building, Hon. Charles E.
    Grassley, Chairman of the Committee, presiding.
        Present: Senators Grassley [presiding], Hatch, Flake,
    Perdue, Tillis, Leahy, Whitehouse, Klobuchar, and Coons.

             OPENING STATEMENT OF HON. CHARLES E. GRASSLEY,
                 A U.S. SENATOR FROM THE STATE OF IOWA

        Chairman Grassley. The United States is the world's leader
    in innovation. We have cutting-edge technologies and products
    that improve our daily lives. This occurs in a good measure
    because of our robust system of intellectual property
    protection and the enforcement.
        Trade secrets are a lesser known but increasingly important
    form of intellectual property. Trade secrets allow for the
    legal protection of commercially valuable and proprietary
    information. Some famous and often cited examples of trade
    secrets include the formula for Coca-Cola or the recipe for
    Kentucky Fried Chicken.
        In fact, a broad range of valuable information may be
    protected as a trade secret, including complex financial and
    technical information and computer algorithms. These trade
    secrets hold immense value for American companies. I would like
    to quote the U.S. Chamber of Commerce recently releasing a
    report stating that, quote, ``publicly traded U.S. companies
    own an estimated $5 trillion worth of trade secrets.''
        Trade secrets encompass an expanding portion of the firms'
    intellectual property portfolios, particularly in knowledge-
    centric areas of the economy such as technology and
    manufacturing.
        However, the theft of trade secrets of American companies
    is increasing, and this hurts the U.S. economy and costs
    American jobs. Globalization, the emergence--emergence of the
    digital economy, and the increasing frequency with which trade
    secret thieves utilize technology and cyber capabilities has
    made it more difficult for trade secret owners and law
    enforcement to guard against theft and to fight back.
        Last year, the FBI's Assistant Director of the
    Counterintelligence Division, Randall Coleman, testified before
    the Committee, quote, ``economic espionage and theft of trade
    secrets are increasingly linked to insider threat and the
    growing trend of cyber-enabled trade secret theft,'' end of
    quote.
        In February 2013, the White House released a report
    detailing, and I quote, ``emerging trends indicate that the
    pace of economic espionage and trade secret theft against U.S.
    corporations is accelerating,'' end of quote.
        Then-Attorney General Eric Holder underscored these
    findings when he stated that, and I quote again, ``There're
    only two categories of companies affected by trade-secret
    theft: those that know they have been compromised and those
    that don't know yet,'' end of quote. The result is that,
    according to a recent report of the Commission on the Theft of
    American Intellectual Property, annual losses owing to trade
    secret theft are likely comparable to the current annual level
    of U.S. exports to Asia, that being over $300 billion. The
    referred--reporter further estimates that trade secret theft is
    responsible for the loss of two and one tenth million jobs.
        Unlike other areas of intellectual property, the protection
    of trade secrets in the United States has mainly been a matter
    of State law, with 47 States having enacted some variation of
    the Uniform Trade Secrets Act.
        While differing--differing trade secret laws share many
    features, State legislatures often made changes as they enacted
    the uniform legislation. This has led some to argue that the
    existing patchwork of State laws imposes difficult procedural
    hurdles in the many cases where a trade secret is taken across
    State lines. Federal law, through the Economic Espionage Act of
    1996, allows Federal law enforcement authorities to criminally
    prosecute trade secret thieves, but it doesn't give trade
    secret owners a private right of action in Federal court.
        As companies increasingly utilize trade secrets and as
    trade secret theft has soared, the FBI reports that their
    caseload for economic espionage and trade secret theft cases
    increased more than 60 percent between the 4 years of `09 and
    `13. In fact, some commentators point out that in the face of
    the FBI--what the FBI has described as an ``immense threat,''
    the Bureau's Counterintelligence Division's Economic Espionage
    Unit, which is tasked with investigating offenses under the
    EEA, does not have the resources and necessary bandwidth to
    bring prosecution of all trade secret cases.
        Now, I've heard from a broad coalition of stakeholders,
    large and small, representing job-creating businesses in
    innovative sectors--sectors of the economy about the need for
    such a Federal law to protect their valuable trade secrets.
        In my own State of Iowa, we've seen firsthand how some of
    our most innovative agricultural companies, like DuPont
    Pioneer, have become targets of trade secret thieves who seek
    to profit from the hard work and research of others. In one
    recent case, foreign nationals were indicted for engaging in a
    scheme to steal proprietary test seeds from Iowa fields to
    benefit a foreign agricultural company.
        So, I look forward to learning more about this important
    issue and look forward to potential legislative solutions. I
    now call on Senator Leahy.

              OPENING STATEMENT OF HON. PATRICK J. LEAHY,
                A U.S. SENATOR FROM THE STATE OF VERMONT

        Senator Leahy. Thank you very much, Mr. Chairman, and the
    hearing today really is a topic that is essential to our
    Nation's economy. It's also more than just the economy; is our
    status as the leading source of innovation around the world.
        You mentioned Iowa. I would mention also in the State of
    Vermont, trade secrets have protected the specialized knowledge
    of woodworkers who have crafted heirloom products for
    generations. They protect the secret recipes for Vermont craft
    brews, some that now have made Vermont a destination State.
    They also protect the closely guarded customer lists for our
    top tourist services. But we also have cutting-edge
    technologies that we are developing in Vermont in plastics,
    software, and green technology that we not only use in our
    State but export around the world. Trade secrets are relied on
    by countless businesses to help keep their products and
    services unique.
        Now, I think they are especially important to small
    businesses. Small businesses often lack the resources that they
    need to seek patent protection for their inventions.
        In the United States, trade secret law is the one form of
    intellectual property protection that currently lacks a Federal
    civil remedy. I think carefully written legislation will fill
    this gap in the law. It can provide businesses not only in
    Vermont but throughout the country with an improved tool to
    protect their intellectual property.
        One priority for me has been ensuring that any seizure
    remedy to protect trade secrets is narrowly tailored. For
    example, so that actions to protect confidential information on
    a computer server do not unintentionally impact other content
    on the server that is unrelated to the theft. I want to thank
    Senator Coons and Senator Hatch for working with me and also
    with some of our top technology--technology companies to
    address this concern.
        In 2012, we passed the Theft of Trade Secrets Clarification
    Act. I introduced that to close a very troubling loophole in
    the law, and I'm glad that the Committee is continuing its
    bipartisan work in this area. I have told Chairman Grassley I
    will work with him and, of course, with Senator Hatch and
    Senator Coons and all Members of the Committee on this issue
    because it is important to American businesses, but also just
    as an American, I would like to see us keep our innovative
    edge, and I don't want to see it eroded.
        So, thank you for holding this hearing, Mr. Chairman.
        Chairman Grassley. We have a distinguished panel and a lot
    of expertise. Our first witness is Karen Cochran, chief
    intellectual property counsel at DuPont and DuPont Pioneer. She
    is responsible for leading the global intellectual property
    team and managing the procurement counsel and litigation of the
    company's IP assets. Prior to joining DuPont, she was senior
    patent director at AstraZeneca Pharmaceuticals. She also served
    as a member of the Intellectual Property Owners Association
    Board of Directors. She received her bachelor's degree in
    chemistry, Temple University, and her law degree from Widener
    University School of Law.
        Thomas--I don't know if it was Beell or Bell, Beall is vice
    president and chief intellectual property counsel for Corning
    Corporation. Mr. Beall has worldwide responsibility for Corning
    intellectual property, including all matters involving patents,
    trademarks, trade secrets, and copyrights. He has held numerous
    positions of responsibility throughout Corning, beginning in
    1996 as a patent attorney for the Life Sciences Division. Prior
    to becoming an attorney, he worked for 4 years as an analytical
    chemist for Bristol-Myers Squibb. Mr. Beall served--earned his
    B.S. degree in biology at Syracuse University and juris
    doctorate from the University of New Hampshire School of Law.
        Sharon Sandeen a professor of law at Hamline University
    School of Law in St. Paul with a focus on trade secret law. She
    has written numerous articles, book chapters, and books on the
    topic of trade secret law and information policy. She co-
    authored the first casebook on trade secret law in our country.
    Prior to teaching, Professor Sandeen practiced law for more
    than 15 years in Sacramento, handling a variety of intellectual
    property cases. Professor Sandeen received B.A. from the
    University of California, Berkeley, her law degree from the
    University of the Pacific, McGeorge School of Law, and a
    master's of law from the University of California, Berkeley,
    Boalt School of Law.
        Finally, we're joined by Mr. Pooley, who is an independent
    lawyer specializing in trade secrets and patents. He has
    written extensively on the subject of trade secrets and
    information management. He recently completed a 5-year term as
    deputy director general of the World Intellectual Property
    Organization in Geneva, where he managed the international
    patent system. Before his service at the United--UN, Mr. Pooley
    was a lawyer in Silicon Valley for 37 years, most recently a
    partner in Morrison & Foerster. Mr. Pooley received a
    bachelor's degree from Lafayette College and a juris doctorate
    degree from Columbia University School of Law.
        We will start with Ms. Karen, and then we'll go just in the
    way you are seated at the table there. Thank you very much.
    Please proceed. Push the red button.

              STATEMENT OF KAREN COCHRAN, GENERAL COUNSEL
                AND CHIEF INTELLECTUAL PROPERTY COUNSEL,
                  E.I. DUPONT DE NEMOURS AND COMPANY,
                          WILMINGTON, DELAWARE

        Ms. Cochran. Good morning, Chairman Grassley and Members of
    the Committee. My name is Karen Cochran, associate general
    counsel and chief intellectual property counsel for DuPont.
    Thanks for the opportunity to testify on an important topic not
    only for my company but for the American economy.
        I want to express my appreciation for the leadership of
    Senators Hatch and Coons for this bipartisan legislation, the
    Defend Trade Secrets Act. I also want to thank the Committee
    for your interest in trade secret protection. DuPont has
    extensive experience in defending our trade secrets, and we
    support S. 1890.
        Throughout our history, DuPont's research locations have
    been the birthplace of innovations found in homes, farms, and
    businesses across the United States and around the world. Our
    products and technologies have included a broad spectrum, from
    nylon, Kevlar, and Tyvek, to seed, crop protection, and enzymes
    that help produce cellulosic ethanol.
        The process for realizing the full potential of our
    innovation comprises a continuum of knowledge-based activities
    that can span decades. Advancement of our innovation depends on
    intellectual property protection, including trade secrets.
        DuPont recently defended the trade secrets for one of our
    well-known products, Kevlar. This experience brought about our
    realization of the importance of S. 1890. I will share some
    highlights and learnings from that experience.
        The technology behind DuPont Kevlar is a high-strength
    fiber used in a range of applications from fiber-optic cables
    to protective body armor, like this Kevlar vest here. Many of
    us recognize it. Some are probably wearing it even in the room
    here. Which--they protect our military and law enforcement
    officers not only here in the United States but around the
    world. DuPont invested over 50 years of research and
    development to master the technology that goes into these vests
    and all of the applications associated with this fiber. Our
    product quality and the manufacturing expertise that we've been
    able to build over that time has been unparalleled.
        DuPont safeguards much of its valuable Kevlar technology as
    trade secrets. It was in 2006, however, that DuPont suspected
    that it had been a victim of trade secret theft. What we
    initially thought to be the misconduct of a single ex-employee
    turned out to be a sophisticated, large-scale trade secret
    theft of one of the most recognized and ground-breaking
    products in history. The Federal criminal investigation led to
    indictments of Kolon Industries. The civil matter that filed--
    that was filed by DuPont v. Kolon would not be resolved until
    2015, over 9 years later.
        As stated in the record, which I will read here, Kolon
    ``undertook various efforts to learn DuPont's trade
    secrets...[and] find out how DuPont...operated...to produce a
    high quality...fiber at a profitable and price-competitive
    production level,'' and essentially they wanted to avoid doing
    the research that we had done throughout the year and short-
    circuit that. To accomplish their goal, they recruited former
    DuPont employees who had access to Kevlar trade secrets
    throughout the employment that they had with DuPont.
        Fortunately, our case was able to access Federal court. But
    even there, we experienced difficulty in determining the depth
    of the trade secret theft that had happened. DuPont pursue
    allegations Kolon had destroyed evidence, and the court found
    that Kolon had destroyed or deleted considerable volumes of
    relevant evidence, and this evidence destruction created
    significant delays and severely hampered DuPont's ability to
    defend our case.
        Our experience defending Kevlar trade secrets exemplifies
    the importance of S. 1890 and its modernization of trade secret
    law. We urge the Committee to consider two points that we
    learned from this experience. One, the need for assured, direct
    access to Federal court; and, two, the need to reduce the risk
    of further trade secret dissemination and evidence destruction.
        First, the court's experience with litigating complex
    technologies for other intellectual property disputes is a
    valuable tool in addressing the complexities in trade secret
    cases. Existing State laws, unfortunately, are inadequate to
    address the interstate and international nature of trade secret
    theft. A Federal civil remedy would eliminate jurisdictional
    complications which occur in these cases and provide the full
    spectrum of options available to owners of other forms of
    intellectual property. Our ability to be in Federal court was a
    significant help in advancing the Kolon case.
        Second, paper copies and locked cabinets are no longer the
    standard medium of storage for information. Information is now
    in portable and electronic. It can be hidden and rapidly
    shared, or it can be quickly deleted, as in the case with
    Kolon. The seizure provisions of S. 1890 enable a trade secret
    owner under limited, controlled conditions, to proactively
    contain a theft before it progresses and a trade secret is
    lost. A seizure mechanism may have prevented Kolon's
    comprehensive destruction of evidence and reduced the need for
    a lengthy, expensive litigation.
        In conclusion, I urge the Committee to consider moving
    forward S. 1890, the Defend Trade Secrets Act. It would
    represent a gold standard for national trade secret theft
    globally. Again, thank you for the opportunity to testify
    today. I will be pleased to answer your questions. Thank you.
        [The prepared statement of Ms. Cochran appears as a
    submission for the record.]
        Chairman Grassley. Thank you. Now, Mr. Beall.

                     STATEMENT OF THOMAS R. BEALL,
                 VICE PRESIDENT AND CHIEF INTELLECTUAL
                PROPERTY COUNSEL, CORNING INCORPORATED,
                           CORNING, NEW YORK

        Mr. Beall. Thank you. Good morning, Chairman Grassley,
    Ranking Member Leahy, and Members of the Committee. My name is
    Tom Beall. I'm the vice president and chief intellectual
    property counsel to Corning Incorporated. I appreciate the
    opportunity to testify today about the importance of trade
    secret protection.
        For contexts, let me give you a little background on
    Corning Incorporated. We have been in business as an American
    manufacturer for over 160 years and take great pride in our
    heritage as one of America's oldest and most innovative
    companies. We operate in 26 States and have manufacturing in 11
    of those States.
        Corning's strategy for success is based on two key
    foundations. First, we invent and innovate with tenacity,
    consistently investing 10 percent of our sales in research,
    development, and engineering. Second, we manufacture
    efficiently. Today we are the world's low-cost manufacturer for
    80 percent of the products we make.
        Here is an example. I have got a spool here of Corning's
    optical fiber. This is an invention that was made in 1970. We
    have got 50 kilometers of fiber here in front of me. This
    invention----
        Senator Leahy. I am sorry. How long is that?
        Mr. Beall. Fifty kilometers of fiber here. This invention,
    an American invention, is one that revolutionized
    telecommunications and forms the backbone of the internet
    today. The original patents are long expired. Now, there are a
    number of companies around the world who make this product. But
    we continue as the global leader. We make millions of
    kilometers of product every year and ship it around the globe.
        So, how do you maintain a leading market position with a
    45-year-old product? Two ways, one, we constantly improve the
    product through research and innovation; and, second, we make
    it more efficiently than others, which depends in large part
    upon trade secrets, lessons learned over the years, in fact,
    lessons learned over decades of production.
        Therefore, our trade secrets are very valuable. Protecting
    our trade secrets allows us to maintain our edge, maintain
    profits, and keep workers on the job.
        Unfortunately, trade secrets are increasingly the targets
    of misappropriation. Currently, the legal tools available to
    protect trade secrets in the United States include the Economic
    Espionage Act and civil remedies available under various State
    laws. The EEA is an essential statute, but it is not a panacea.
    Federal investigators and prosecutors--prosecutors have limited
    resources and are unable to bring charges in all cases of trade
    secret theft.
        At the State level, most States have enacted laws modeled
    on the Uniform Trade Secrets Act. Although these laws may work
    effectively, as to intra--intrastate theft, their State border
    limitations restrict their usefulness in matters of interstate
    and international misappropriation.
        As you know, today many companies operate across State and
    international borders. For these companies, the existing
    patchwork of State laws is inadequate for several reasons.
        First, State secret theft often requires immediate action
    to preserve the value of the stolen property, particularly when
    a stolen trade secret is taken across State lines, or when the
    thief seeks to leave the country. State courts lack the tools
    at the Federal court's disposal to act quickly to prevent
    dissemination of stolen trade secrets across State lines.
        Second, State courts are not able to effect prompt,
    nationwide service of process to seamlessly conduct cross-
    jurisdictional discovery.
        Third, variation in State laws creates challenges for
    companies seeking an efficient, unified compliance plan and
    results in the additional unnecessary cost of investigating
    different State laws.
        The Defend Trade Secrets Act will create a uniform standard
    for the protection of trade secrets nationwide, improving the
    efficiency and predictability of litigation and allowing
    companies to create one set of best practices to protect their
    intellectual property in every jurisdiction. With a Federal
    cause of action available, litigants can streamline multi-
    jurisdictional discovery and service of process, resulting in
    faster and less costly litigation. The legislation will also
    provide a mechanism for obtaining expedited relief when a
    company's trade secret is threatened with imminent destruction
    or dissemination. In extraordinary cases, this includes ex
    parte seizure of the stolen trade secret when necessary to
    preserve the value of the property.
        The Defend Trade Secrets Act also contains safeguards to
    prevent abuse, including damages in the event of wrongful
    seizure.
        We thank Chairman Grassley and Ranking Member Leahy for
    their leadership on trade secret issues and intellectual
    property more generally. We thank Senators Hatch, Coons, and
    Flake for introducing this important legislation and the
    Committee Members who have Co-Sponsored the Defend Trade
    Secrets Act; Senators Durbin, Tillis, Blumenthal, Sessions,
    Klobuchar, and Perdue. Your consensus-oriented approach to this
    legislation has helped to attract support from all industry
    sectors, and we look forward to continuing to work together on
    this issue that is so important to the American economy. Thank
    you for the opportunity to testify today. I would be happy to
    take questions.
        [The prepared statement of Mr. Beall appears as a
    submission for the record.]
        Chairman Grassley. Professor Sandeen.

               STATEMENT OF SHARON K. SANDEEN, PROFESSOR
                   OF LAW, HAMLINE UNIVERSITY SCHOOL
                      OF LAW, ST. PAUL, MINNESOTA

        Professor Sandeen. Thank you, Chairman Grassley, Ranking
    Member Leahy, and the other Members of the Senate Judiciary
    Committee. I am honored to be here today.
        As a trade secrets scholar, I certainly agree that trade
    secrets are very important, and for the record, I am against
    trade secret misappropriation and think that we need to have
    strong laws against trade secret misappropriation. I just
    happen to believe that the existing laws are sufficient and the
    proposed Defend Trade Secrets Act doesn't--will cause more
    problems than it solves.
        I want to speak particularly from the perspective that I
    don't think has been adequately represented in discussions
    about the legislation, and that is of the numerous startup
    companies, entrepreneurs, mobile employees, and small and
    medium-sized businesses that are sued for trade secret
    misappropriation and forced to defend themselves, often when
    there are no legitimate trade secrets or little or no evidence
    of misappropriation. And I should point out an empirical study
    that was conducted about 5 years ago revealed that more than 50
    percent of the time, the defendants win on dispositive motions
    and at trial.
        I'm happy that over 40 law professors from across the
    country have joined me and my co-authors in expressing their
    concerns in two letters written in opposition to the proposed
    legislation, one in 2014 and one just recently.
        Now, the reason why there is potential for abuse is that
    trade secrecy and the scope of trade secret protection is
    misunderstood. When considering whether the DTSA actually
    addresses cyber espionage and would be a solution to trade
    secret misappropriation, it is very important to understand
    that trade secret law does not protect all business
    information. It does not even protect all secret business
    information. It only protects a subset of secret business
    information which can meet stringency--stringent requirements
    imposed by the UTSA.
        Now, the trade secret doctrine has long recognized, for
    instance, that information that's known generally among the
    public and within particular industries is not protected by
    trade secret law. Also, the general skill and knowledge that
    employees learn on the job, often including highly specialized
    knowledge and skills, is not protected by trade secret law, at
    least as it is written under the UTSA.
        Now, the reason why trade secret law is limited is very
    important. There are two principal reasons. First, there's a
    strong public policy, repeated in numerous Supreme Court cases,
    that the law cannot and should not protect information that is
    in the public domain. Additionally, there is a long-standing
    policy in this country that inventors should seek patent
    protection rather than keeping their inventions as trade
    secrets.
        As the U.S. Supreme Court stated, trade secret protection
    must be limited because, otherwise, it interferes with the
    patent policy of disclosure of information, and this is a
    disclosure of information upon which others can build and
    ultimately compete.
        The DTSA, when coupled with recent changes to patent law as
    a result of the American--America Invents Act, threatens to
    disrupt this long-standing policy and I believe is the real
    motivation behind calls for a Federal law. Enabling companies
    to threaten Federal trade secret litigation, particularly with
    respect to formulas and processes that can be used while still
    being kept hidden, will undermine the disclosure purposes of
    both U.S. patent law and State trade secret laws.
        Now, I have also written--and I will limit my comments
    here--that I believe the Defend Trade Secrets Act will increase
    litigation costs significantly. One reason is because there is
    no current Federal jurisprudence on trade secrecy. That will
    have to be developed.
        I am also--I'm particularly concerned that well-established
    principles of trade secret law discussed in the comments to the
    UTSA are not included in the proposed legislation. And, of
    course, I am also concerned about the seizure remedy, which
    would be unprecedented in the United States and I think is
    going to be used abusively. I will end there and entertain any
    questions. Thank you very much.
        [The prepared statement of Professor Sandeen appears as a
    submission for the record.]
        Chairman Grassley. Thank you, Professor. Now, Mr. Pooley.

                 STATEMENT OF JAMES POOLEY, PRINCIPAL,
               JAMES POOLEY, PLC, MENLO PARK, CALIFORNIA

        Mr. Pooley. Good morning, Chairman Grassley, Ranking Member
    Leahy, and Members of the Committee. My name is James Pooley.
    Since the beginning of my legal career in 1973, I have handled
    hundreds of trade secret disputes, representing mostly smaller
    companies, startups, and individuals in the technology industry
    and acting both for plaintiffs and defendants. Thank you for
    holding this hearing and examining this critical subject.
        Recent studies have shown that businesses increasingly rely
    on trade secrets to protect their competitive advantage, and
    this is particularly true for small businesses. While trade
    secrets have become more important, advances in electronics,
    like flash drives and smartphones, have made data theft almost
    infinitely easier and faster. And unlike the threats of a
    generation ago, when trade secret theft typically benefited a
    local competitor, globalization of business means that today's
    insiders often steal on behalf of companies located in another
    State or country.
        Traditional State remedies for trade secret
    misappropriation are too inefficient to fully meet this new
    challenge. The Uniform Trade Secrets Act has been widely
    adopted, but with many deviations. In addition, State
    procedural laws were not designed for efficiency and cross-
    border disputes. If a case in Illinois requires testimony of a
    witness in California, getting the required orders from both
    States can take weeks or months.
        The Economic Espionage Act makes some trade secret theft a
    Federal crime, but relying on U.S. attorney to file criminal
    actions would only deal with a small fraction of the cases. So,
    neither State law nor the EEA offers a satisfactory solution to
    the time-critical nature of interstate and international
    misappropriation of a company's know-how.
        Federal courts, however, can provide the necessary
    resource. They can provide a national standard for trade secret
    misappropriation and a transparent set of procedural rules,
    allowing nationwide service of process and enabling quick
    action by trade secret owners, even when confronted with actors
    in multiple jurisdictions.
        American businesses both small and large operate across
    State and national borders, and they deserve a Federal civil
    remedy when their know-how is taken.
        I strongly disagree with those who argue that we don't need
    Federal legislation because State laws are uniform enough, that
    the DTA's seizure provisions--DTSA's seizure provisions are too
    broad, or that the legislation would increase costs and
    interfere with the right of individuals to change jobs.
        First, the variations in the UTSA today are in some cases
    worse than had existed before it was proposed. These
    inconsistencies burden companies, including small ones, that
    have interstate or international business. The DTSA will
    provide a level of uniformity across the Federal system that we
    had hoped for but didn't get with the UTSA.
        Second, the ex parte seizure language in the DTSA is narrow
    and designed to avoid abuse. The application must clearly and
    specifically demonstrate all the required facts. Only property
    necessary to prevent the propagation or dissemination of the
    trade secret can be seized. The order has to minimize
    interruption to the defendant's business. These protections are
    greater than exist for the other ex parte form of relief, the
    TRO.
        So, getting a seizure order will be extremely difficult,
    and the consequences of a careless petition can be severe,
    including damages that are not limited by the amount of bond
    that must be posted. Third, the DTSA will not increase the cost
    of trade secret litigation. We have had decades of experience
    with Federal courts handling these cases under supplemental or
    diversity jurisdiction, and there is no evidence of any
    difference in costs.
        Finally, the DTSA presents no danger to the mobility of
    labor. It uses precisely the same language as the UTSA in
    permitting injunctions against threatened misappropriation. And
    it adds language barring injunctions against taking a job under
    conditions that avoid actual or threatened misappropriation.
    This provides additional assurance and is consistent with the
    law in every State that has enacted the UTSA, including
    California.
        In conclusion, we need the DTSA to fill a gap in remedies
    available to U.S. businesses operating in an information-based
    and globalized economy. The DTSA has been carefully fashioned
    to deter and punish abuse. Using well-established definitions
    and terms, it provides businesses a choice to file a familiar
    claim in an effective forum. And it does this without creating
    any new risks for small businesses or individuals.
        I applaud the authors, Co-Sponsors, and the Chairman and
    Ranking Member for their leadership on this issue. As an
    experienced practitioner, I can say that the DTSA will improve
    the efficiency of trade secret litigation. Thank you.
        [The prepared statement of Mr. Pooley appears as a
    submission for the record.]
        Chairman Grassley. We will have 5-minute rounds of
    questions. I will start with Ms. Cochran. Senator Leahy will
    follow me. Then I want to announce that I am going to go to the
    Agriculture Committee meeting, and Senator Hatch is going to
    take over at that point.
        So, I have had an opportunity to visit Pioneer several
    times there in Iowa and see firsthand the impressive
    technological advancements that are taking place within the
    company. So, my question gives you an opportunity to expand on
    what probably your printed testimony says you didn't have an
    opportunity to go into in your 5 minutes. When it comes to
    property--protecting your proprietary research, how important
    are trade secrets as a part of DuPont's intellectual property
    portfolio?
        Ms. Cochran. Thank you, Chairman. They are exceptionally
    important to us. We use the whole range of intellectual
    property from patents to trade secrets, but trade secrets have
    always been important to us. They've been, as I mentioned with
    the Kevlar technology, 50 years in the making. Without them we
    couldn't continue to bring new technology, and we couldn't
    attract collaborators, customers. We couldn't bring the quality
    that we bring to the table.
        So, we see it to not only help us to--to have the quality
    and the research that enable us to partner and collaborate, but
    it also enables us to continue to build on what we have.
    Without it, we wouldn't be able to stay competitive either.
        Chairman Grassley. Mr. Beall, we have heard staggering
    numbers when it comes to the impact of trade secret theft on
    the economy overall. So, share with the Committee how trade
    secret theft affects your company, and maybe the most important
    part of this question would be the potential economic
    consequences that result from the theft of trade secrets.
        Mr. Beall. Yes, thank you, Chairman. Trade secrets are
    absolutely critical as an economic lever for Corning's success.
    Just to give you an example of a situation that has occurred in
    our business, we make LCD glass for televisions, big-screen
    televisions, which are ubiquitous throughout American and
    worldwide society. That glass is critical to those televisions,
    and we are the world leader in manufacturing that particular
    product.
        Now, when you take a piece of that glass, which is
    approximately 10 feet by 10 feet, so a massive piece of glass,
    it's half a millimeter thick, and our specifications, our
    requirements for making that glass require that if the glass
    itself, the half-millimeter thick, were the depth of the
    Pacific Ocean, 5 miles, we would not be able to tolerate a wave
    on top of the ocean more than 10 centimeters. So, there are
    extreme, stringent requirements on us to make a piece of glass
    that thin, that big, with very few defects on the surface of
    the glass in order to make these LCD televisions.
        And part of our experience is that we have had two or three
    companies, or glass companies, who have knowledge in making
    glass, try to enter this business and have spent enormous
    amounts of resources trying to become competitive in this
    particular business, and they have failed. They have packed up
    and left and said, ``Forget it. I can't do it.'' And the
    reason? The reason they packed up and not moved forward is
    because of the trade secrets and the intellectual property
    contained in our process that makes it work for us, that has
    been built up over the course of years.
        And does that save American jobs? You bet it does. The jobs
    that we have at Corning maybe not--maybe would not exist were
    it not for the protection of those assets.
        Chairman Grassley. Thank you very much. I'll go to Mr.
    Pooley, and I compliment Senators Hatch and Coons on their
    legislation. I do want to ask about S. 1890 for this Federal
    civil remedy that we're talking about. Some opponents of the
    Federal civil rights of action have argued that there isn't a
    need for a Federal civil law. We've heard that argument already
    this morning. Why is a Federal civil law necessary from your
    point of view? And why aren't current Federal criminal and
    State civil statutes sufficient?
        Mr. Pooley. Thank you, Senator. The answer to that is,
    first of all, that State remedies are too varied, too
    unpredictable, to address the problem. Years ago, when trade
    secret theft was mainly local, on behalf of a local competitor,
    those laws were generally adequate. Today, when most trade
    secret theft, although still done by insiders, is prompted by
    global competition, competitors outside the State, and can be
    done with technologies that allow the transportation of
    information that before might have taken a truck but today only
    takes a USB key slipped in somebody's pocket, requiring a
    completely different set of remedies. It used to work years
    ago. It can't work today. We need a common remedy across the
    United States for companies to choose when they have a case
    that isn't entirely local and that affects their interstate
    business. And that's what S. 1890 will provide.
        Chairman Grassley. Senator Leahy.
        Senator Leahy. Thank you, Mr. Chairman.
        Let me follow-up on that, Mr. Pooley. What you were saying
    about the truck backing up or the flash drive or something
    stuck in your pocket, unfortunately it applies to so many
    things. We've discovered that even in Government agencies that
    pride themselves on keeping their secrets until somebody walks
    off with all of them.
        The--what I hear from small businesses in Vermont--and some
    of them are really cutting-edge in what they're coming up
    with--is that a Federal trade secrets bill is important because
    they rely on trade secrets as an easier, more affordable tool
    to protect their intellectual property.
        Now, Professor Sandeen said that this bill could have
    unintended consequences for small businesses. Now, you have
    represented and do represent small startups in your legal
    practice. What do you say to that?
        Mr. Pooley. Thank you, Senator. My observation has been
    that small businesses need effective trade secret protection at
    least as much, and often more so, than large ones because they
    depend on it, for--in an existential way, for the existence of
    their business. They need to have a remedy----
        Senator Leahy. In some ways it is their business.
        Mr. Pooley. It is their business, and they need a remedy
    that will work for them. And so, when you have businesses like
    those in Vermont that have leading technologies but they have
    markets across the country, they can't afford to go hiring
    lawyers in different States to run after someone before they
    leave the country and lock down that trade secret. They need
    something that will work immediately to get relief in--and that
    is, in Federal court--to stop the propagation or the
    destruction of the secret. It is Federal court that gives the
    efficient remedy for that kind of need.
        Senator Leahy. Thank you.
        Mr. Beall, one of my priorities--and I have been looking at
    this legislation, which I want to be able to join. One of my
    priorities has been ensuring the seizure provisions of any
    trade secret bill that is narrowly tailored, make sure there
    are legal checks in place so they are not being abused.
        Now, you've been involved in helping to craft the text of
    this bill. How are those kind of concerns addressed?
        Mr. Beall. Thank you, Senator. That's a very good question,
    and the seizure--ex parte seizure provision is intended to be
    very narrow and for use in only limited circumstances. So, some
    of the things that were concerning were that the seizure
    provision was intended to address rogue employees. That was the
    main intent behind it. But concerns were raised by companies
    that it might be used against them as recipients of
    information.
        So, for example, a cloud-based business who may end up
    having the information stored on their server, would they be
    subject to the ex parte seizure provision? The intent was no.
    So, safeguards were added. Basically, third parties are not
    subject to the seizure, only the misappropriator he or himself.
    The seizure applies only in those circumstances where a court
    order is likely to be--is unlikely to be complied with and the
    misappropriator is likely to be a flight risk. The seizure
    itself will include only property necessary to prevent
    propagation or dissemination of the trade secret, and it will
    be very narrowly tailored.
        Now, on the flip side, the party who is harmed by wrongful
    or excessive seizure has a remedy for damages and fees. And I
    can tell you this is not a seizure--this is not an item that we
    would take lightly. We certainly do not want to raise the ire
    of a district court judge and take any of these matters
    flippantly.
        Senator Leahy. You would feel, as I do, those kind--that
    kind of tailored specificity is important to the bill.
        Mr. Beall. Yes, I do.
        Senator Leahy. Incidentally, I am still impressed at the 50
    kilometers. I keep looking at it.
        Mr. Beall. It is good for fishing, too.
        [Laughter.]
        Senator Leahy. I don't ever get that far away, at least not
    in Vermont.
        Ms. Cochran, you testified about the importance of trade
    secret protection to DuPont's Kevlar technology. You may know
    that the law that is used to provide bulletproof vests, a
    Federal law to provide bulletproof vests to police officers
    around this country, was written by myself and a former Senator
    from Colorado, Senator Campbell. And some people say you do not
    need new legislation to protect a trade secret because you
    could use State laws or seek help from law enforcement. I
    assume you disagree with that. Why do we need a Federal law?
        Ms. Cochran. Absolutely, we do. Thank you, Senator. Well,
    for some of the same reasons that have been pointed out. Today
    the information that is out there can be moved very quickly and
    deleted. For that reason, we need to be able to have a greater
    sophistication with the Federal system that could handle that,
    could handle the multinational and the multi-State impact.
        Senator Leahy. My time is up, and, Chairman Hatch, I know
    there are questions for Professor Sandeen and others. I can
    submit those for the record, I assume.
        Senator Hatch [presiding]. If you want to go ahead, I----
        Senator Leahy. No, that is all right. We have others
    waiting.
        Senator Hatch. Without objection, no question. Thank you,
    Senator Leahy.
        Before I begin with my questions, I want to thank Chairman
    Grassley for holding this hearing. For years, Senator Coons and
    I have worked on crafting the Defend Trade Secrets Act, a bill
    to create a Federal private right--private right of action to
    protect trade secrets. Today there are 15 bipartisan Co-
    Sponsors to the bill, including 9 Members of this Committee.
    And on our side, I want to particularly pay--pay tribute to
    Senators Flake, Tillis, and Perdue for the work that they have
    done in helping to get this--this far.
        Now, I count over 40 companies and associations that have
    endorsed the Defend Trade Secrets Act, including Corning,
    DuPont, the American Bar Association, the Information
    Technology Industry Council, Microsoft, Intel, General
    Electric, Adobe, and the Internet Commerce Coalition, just to
    name a few. I'm not aware of any stakeholder opposition to this
    bill. And those who operate businesses in the real world and
    have to protect their trade secrets on a regular basis are
    strong supporters of the Defend Trade Secrets Act.
        Now, this bill is ready to move, not just through the
    Committee but also on the Senate floor. I think now is the time
    to act, and it's the right thing to do. So, I ask unanimous
    consent to insert into the record letters from the Protect
    Trade Secrets Coalition, the American Bar Association's Section
    of Intellectual Property Law, the Intellectual Property Owners
    Association, the National Alliance for Jobs and Innovation, the
    American Intellectual Property Law Association, and a blog post
    by Microsoft Corporation. So, we will add those to the record.
        [The information appears as a submission for the record.]
        Senator Hatch. Let me start with you, Ms. Cochran, and Mr.
    Beall as well. It is very important that people understand how
    this bill will address certain problems. Let me ask you about
    this in two ways.
        First, in her prepared statement, Professor Sandeen says
    that ``the vast majority of trade secret claims...involve
    former employees or other business associates.'' Do you agree
    this bill would address that category of bad actors?
        And, second, in her prepared statement, Professor Sandeen
    says that the bill does not directly address the problem of
    cyber espionage. Do you agree with her that cyber espionage is
    not the primary focus of the bill?
        Ms. Cochran. Thank you, Senator. Yes, we do believe that
    many of the trade secret claims do involve former employees and
    internal actors. No question about that. That's been our
    experience throughout the major cases that we have had over the
    last several years.
        With regard to your second question, while cyber espionage
    is, of course, a concern for us, we don't see the bill as
    focused on that. It's focused on trade secret theft generally.
    Cyber espionage is but one facet of that.
        Senator Hatch. Mr. Beall.
        Mr. Beall. I would agree wholeheartedly with Ms. Cochran.
    Corning's view is that the trade secret bill is geared toward
    situations where there are rogue employees, bad actors, and 95
    percent of the situations that occur within Corning are just
    those situations, where an individual is collecting information
    in a protected way with the intent of leaving with it and
    selling it or otherwise using it elsewhere. That is the main
    focus, that is the main situation that we need some help on.
    And certainly cyber espionage is an issue, but that is not the
    thrust or the main point not only of this bill but of our
    concern at this point.
        Senator Hatch. Well, thank you. In her prepared statement,
    Professor Sandeen refers to what she calls a, quote, ``trade
    secret troll problem,'' unquote. I will ask you this, Mr.
    Pooley. Is there such a thing as that, a trade secret troll
    problem?
        Mr. Pooley. Thank you, Senator. No, there is not. In fact,
    what makes a troll derives from the child's fable about the
    troll sitting under the bridge waiting for some unsuspecting
    person to come by, jumping up and demanding a toll to get
    across the bridge. And that's been applied to patents because
    patents are a no-fault liability, and hundreds of unsuspecting
    people and companies can be potentially infringing a patent.
    But that doesn't apply in trade secrets. Under trade secret
    law, there can only be liability if you have a confidential
    relationship or if the actor has deliberately, using improper
    means, gotten access to the information.
        So, these are one-off cases. It makes no sense at all to
    try to apply this metaphor of the troll that we use in certain
    patent cases to the trade secret environment. None at all.
        Senator Hatch. Okay. Thank you.
        Now, today U.S. businesses have--I will direct this again
    to you, Ms. Cochran, and you, Mr. Beall. U.S. businesses today
    have two tools to protect their trade secrets. State civil
    statutes and a Federal criminal statute. Now, the Defend Trade
    Secrets Act would simply add a Federal civil statute to
    complete the picture. Since this bill would not preempt State
    law, would State law continue to be valuable in protecting your
    trade secrets? And, also, do you agree that States should
    continue to enforce their own laws to protect trade secrets as
    they see fit? We will start with you, Ms. Cochran.
        Ms. Cochran. Thank you, Senator. Yes, we believe that if
    the trade secret theft took place and it's a matter that is
    within State borders, then the State law should still apply.
        Senator Hatch. Sure. Do you agree with that, Mr. Beall?
        Mr. Beall. I do agree with that. As you mentioned, Senator,
    this particular law is not intended to preempt State law, so
    there's certainly a place for State law. That is a weapon and a
    tool at our disposal and should not change based on this
    legislation.
        Senator Hatch. Well, thank you.
        Now, just one last question to Mr. Pooley. I wanted to
    follow-up on what Senator Leahy mentioned about how the Defend
    Trade Secrets Act would impact small businesses and startups.
    Some argue that the ex parte provision in the bill would be
    costly for small businesses and startups, especially to defend
    against wrongful seizure or abuse. How do you respond to this
    concern?
        Mr. Pooley. Thank you, Senator. Small businesses would not
    be harmed by the ex parte seizure provision. It is so limited,
    particularly after the changes that were introduced this time
    around. To add additional safeguards and to limit the kind of
    property that can be made subject to the seizure, the sort of
    information that has to be presented to the court, the quality
    of that information, and, in addition, of course, the
    consequences of making an improper application for seizure are
    so severe that small businesses would have nothing to be
    concerned about because it would apply only to very specific
    information; and if it turned out that there was some mistaken
    identity and the whole application was improperly filed, the
    court has very very adequate remedies to punish the applicant.
        So, small entities really have nothing to fear from this.
    In fact, small entities need this in order to be able to get
    protection for the property that they depend on their secret
    information.
        Senator Hatch. Well, thank you. I want to thank all the Co-
    Sponsors of this bill, and I think we'll get more. But I
    especially want to thank Senator Coons, and we'll turn to you
    next. Senator Coons?
        Senator Coons. Thank you, Senator Hatch, and I want to
    thank the Chairman and the Ranking Member for calling this
    hearing to examine trade secret theft, its importance in the
    American economy, and whether the Defend Trade Secrets Act
    might be a part of the solution. And I want to especially thank
    Senator Hatch for his terrific leadership on intellectual
    property over so many Congresses and the work that he and his
    staff have done. He has already referenced the very wide range
    of support for this measure in the Senate, the 15 current Co-
    Sponsors, and among the whole stakeholder community. I'll also
    mention the identical House version introduced by
    Representatives Collins and Nadler has 93 Co-Sponsors.
        I think the biggest reason for this broad groundswell of
    support is because the bill provides a commonsense and focused
    tool to fight a large and growing problem. American businesses,
    are, as has been mentioned before, losing hundreds of billions
    of dollars annually to trade secret theft and misappropriation.
    Federal law enforcement, however, only has the resources to
    bring a handful of Federal criminal cases, just 15 for the
    whole country last year.
        Civil enforcement is left to a patchwork of sometimes
    inconsistent State laws, so I view this as an opportunity to
    create a uniform standard that will allow all parties to use
    the same law combined with access to Federal courts and
    injunctive relief, appropriately narrowly tailored, to address
    this growing threat to American competitiveness.
        Senator Hatch and I've also worked on an open legislative
    drafting process through which we've taken into account many
    criticism and legitimate concerns and made modifications, and I
    am committed to continuing to do so, although I think the wide
    range of supporters for the bill already indicates we are
    pretty close to having a finished product.
        I would like to ask consent, if I might, to include in the
    record three additional documents. A letter of support from 20
    preeminent trade secret practitioners, led by Mark Krotowski of
    Morgan Lewis and Mark Halligan of Fisher Broyles; as well as an
    article from Corporate Counsel by Mr. Krotowski and Greta
    Burkholder; and a statement for the record by Mr. Krotowski.
        Senator Hatch. Without objection, they will be entered into
    the record.
        [The information appears as a submission for the record.]
        Senator Coons. Thank you, Senator.
        If I might, Ms. Cochran, just an opening question for you,
    and thank you for the example of Kevlar and the detailed
    example of how trade secret theft has significantly impacted
    DuPont. Am I correct that DuPont finds itself on both sides of
    trade secret disputes? And how do you think this bill
    appropriately balances the rights and the concerns of both
    plaintiffs and defendants in trade secret litigation?
        Ms. Cochran. That is a great point, Senator. We do find
    ourselves on both sides of the table, which is why we have been
    very careful in the review on this. We have been sued for
    alleged trade secret theft, and so we view it with the eye of
    both what would happen, you know, as both a defendant and as a
    plaintiff. So, we feel comfortable both on the employee
    mobility issue for that reason, because we have also found
    ourselves hiring from, you know, top talent that happens to be
    in competitor areas as well, and the same thing on the seizure
    side when it comes to being a plaintiff or a defendant.
        Senator Coons. Well, thank you. Mr. Beall, as we all
    continue to focus on your 50 kilometers of fiber optic cable,
    one of the innovative components of this legislation is that it
    allows for a victim of misappropriation to go to court and get
    an ex parte order, a tailored, focused order providing for the
    seizure of misappropriated information. And there has been some
    concern raised about whether that has been appropriately
    tailored.
        Do you have a real-life example you might share with us
    that is illustrative about where this remedy could have
    prevented the loss of Corning's trade secrets and then how that
    impacts your manufacturing and your ability to keep jobs in the
    United States?
        Mr. Beall. Yes, I do. Thank you, Senator. We have a
    situation where there was an individual who had taken a fair
    amount of information, proprietary and trade secret
    information, upon leaving the employ of Corning, and it became
    apparent that that individual had taken the information. We had
    a limited amount of time to act. We reached out to the FBI, and
    their resources were constrained, as you might imagine. And,
    again, with the limited amount of time, we sought a temporary
    restraining order in the local State court, which was granted,
    but ultimately the individual fled the country, and the trade
    secrets left with the individual.
        Now, had we had the ex parte seizure in this particular
    circumstance and the FBI was unable to assist because of--
    because of constraints--and I don't want to say the FBI hasn't
    been helpful. They have been helpful, incredibly helpful in
    many circumstances for us. But in this particular instance,
    they didn't have the resources available. In this instance, we
    would have at least had the option to seek the ex parte seizure
    remedy and obtained our information back prior to the
    individual leaving the country with the stolen trade secret
    information.
        Senator Coons. Well, thank you.
        Senator Hatch, I will have further questions in another
    round, but I am grateful for those opening two answers. Thank
    you very much for your work.
        Senator Hatch. Senator Flake, we will call on you.
        Senator Flake. Thank you, and I want to thank the Chair and
    Ranking Minority Member for having this hearing as well. And I
    appreciate the work that has been done, and I appreciated
    working with Senators Coons and Hatch particularly on this. I
    particularly want to thank them for working with me on the
    provisions regarding ex parte seizure to make sure that they
    are narrowly tailored and that they contain the relevant and
    necessary due process protections and can't be abused. I will
    not say any more about the need for this legislation and the
    impact of this on the economy. To make sure that it does, the
    fact that you say it is 50 kilometers rather than 31.069 miles
    of cable there I think indicates that you export a lot of it,
    and so that's important for our economy nationally, and
    Corning, I might add, has a good facility in Arizona where you
    manufacture some telecom cable. So, I appreciate the work that
    has been done.
        Mr. Pooley, can you shed some light? I know there's been
    some concern expressed by some that just as with patents there
    might be some kind of troll problem if legislation like this is
    enacted. Has there been any example at the State level with
    these State laws of trolling that we--that we should be
    concerned with? And is that likely to ramp up if we have some
    Federal remedies here?
        Mr. Pooley. Thank you, Senator. Indeed, no, we have never
    experienced a trade secret troll problem, and for the reasons
    that I described a little bit earlier, it's simply not possible
    because trade secret law is so different than patent law in
    that way. It is certainly possible from time to time that
    individual plaintiffs in a trade secret case may bring a weak
    case, but since the enactment of the Uniform Trade Secrets Act,
    there has been fee shifting available as a remedy. And we have
    seen nothing that looks like a general problem of people who
    own trade secrets going off and filing lawsuits against many
    others. First of all, they can't do it. And, second of all, the
    remedies are sufficient to disincentivize that kind of
    behavior.
        Senator Flake. Ms. Sandeen, do you want to shed some light
    on that? Is that a concern that you have?
        Professor Sandeen. Well, Senator, thank you. First of all,
    in the article that Jim is referring to, Mr. Pooley is
    referring to, that I wrote with a co-author, we did
    characterize our concerns about abusive trade secret litigation
    as a ``trade secret troll problem.'' And one thing to
    understand is basically the meaning of that term, since it was
    first coined in the patent context, has kind of morphed to mean
    in broader terms abusive IP litigation, and that's really our
    concern. And I mention it in my written statement. Small
    businesses are being sued for all manner of IP infractions,
    which are not necessarily strong claims, and then they have to
    defend them, and often it disrupts their business, and often it
    puts them out of business.
        So, it's not a surprise to me that there are not a lot of
    people in that camp opposing this bill because they have gone
    out of business, a lot of them. And I know Jim. Jim and I
    practiced law in California for many years together, and I'm
    sure he has represented defendants who were victimized by very
    weak intellectual property claims, very weak trade secret
    claims. And so, that's what we are referring to when we are
    talking about trade secret trolls.
        Senator Flake. As I mentioned, Ms. Sandeen, we took great
    care, we believed, to make sure that the ex parte seizure
    provisions are narrowly tailored and due process provisions are
    there. Do you have concerns still about the language here, that
    it is too broad? Or is it tailored enough?
        Professor Sandeen. You know, I recently wrote a book on
    international trade secret protection, and this remedy comes
    from the U.K. It's called an ``Anton Piller order.'' And even
    the judge who created that order in that particular case in the
    U.K. has since said that it was--it has been overused. It was a
    very unique situation.
        So, I do continue to have concerns, and I think the
    existing preliminary injunctive relief power that the Federal
    courts have and the State courts have is sufficient without
    this very extraordinary remedy.
        Senator Flake. Thank you, Mr. Chairman.
        Senator Hatch. All right. Senator Whitehouse.
        Senator Whitehouse. My time is short and my questions are
    many, so what I think I will do is ask them and ask people to
    get back to me for the record, because some of them are going
    to be somewhat complex.
        My first question is; bearing in mind that the subjects of
    these orders are, by definition, recalcitrants who will not
    obey a lawful injunction, what degree of force may be used in
    the execution of the seizure order? I don't know if any of you
    have been present at the scene of a search warrant execution,
    but it is a highly disruptive and occasionally violent process.
    May doors be broken in? May cabinets be forced open? Are
    employees sequestered the way they are in a search warrant
    application? And presumable it's done without notice in order
    to preserve the element of surprise. So, the element--the
    extent of the force and surprise that would be used in the
    execution, I'd be interested in, and also by whom? Would the
    court marshals be sent out to do this? Would private actors be
    authorized to do this? So, that would be my first question.
        The second is once something is seized, I get this if you
    are looking at an object or a sample that you can grab and take
    back and now it is out of the control of the individual. It's a
    little bit different when you are dealing with electronic
    information. If you have to seize an entire company's computer
    systems, for instance, in order to be able to control the space
    in which the sought information exists, then somebody has to
    have the task of sorting through all of that seized information
    in order to isolate the information that is subject to the
    order. Who does that sorting? And what are the privacy concerns
    for whoever else's information might be swept up in that
    broader search? And how do they protect themselves? Who becomes
    the person who sorts through all this and decides where the
    boundaries of the sought information are?
        Third question. What happens if you now go to the cloud?
    Now, you are executing this seizure order, search warrant,
    whatever it is, in a third party's very complex data
    environment. What are the constraints there? And, again, how do
    you deal with the problem of overseizure now that you are
    dealing with cloud and potentially much larger amounts and a
    real difficulty of identifying whose personal information might
    be there? So, that would be question three.
        Question four is how realistic is it that any seizure would
    be deemed wrongful or excessive after a court order had been
    obtained for it? Is that really a meaningful constraint on this
    process? A court order is usually an absolute defense to any
    concern that the act involved was unlawful. You are executing
    the court order. And if the execution of the order was unduly
    either violent or broad on the part of the marshals or whoever
    else was executing it, then who is at fault? Because, you know,
    there are separate parties, the party who came in, the company
    that wants it executed, and then whoever did whatever the
    actual seizure was.
        Fifth, both witnesses Beall--Beall and Pooley have in their
    fact patterns that they have used described the intention to
    flee overseas and outside the jurisdiction of the United
    States, which is obviously a very legitimate concern. I have
    been the Anti-Piracy Caucus Chair with Senator Hatch, so I am
    deeply concerned about this, but I don't want to create
    something that becomes a menace to Americans in the spirit of
    accomplishing that. If what we're really concerned about is the
    intention for people or for the data to flee overseas,
    shouldn't we focus this on that problem rather than on people
    who are going to stay in the country, who are going to be
    always amenable to various judicial orders, and so forth?
        And, finally, in my experience, employee agreements that
    involve confidentiality, nondisclosure, and noncompete can
    often end up being pretty hard fought. There end up being very
    strong feelings on both sides. If this becomes as hardball
    tactic in a battle between a company and an employee who has
    now moved on to become a competitor or to do something else and
    they are arguing about, well, they shouldn't have taken this
    list or whatever, should we exempt cases that involve that kind
    of standard employee civil dispute from the application of this
    particular mechanism?
        And I am over my time already, so I will leave it with
    that. But I hope I've conveyed my sense that as much and as
    deeply as every person here cares about protecting our
    intellectual property, I have called cyber intellectual
    property theft the biggest wrongful theft of the transfer of
    value in the history of humankind. But launching this kind of
    potentially violent, surprise, Government-sanctioned action
    into people's homes and businesses and potentially also into
    data, which it gets very hard to know where the limitations
    are, I think is something that deserves a good deal more
    caution than I have heard in this hearing so far.
        Thank you, Chairman.
        Senator Hatch. Thank you, Senator. We will try and get
    those questions from the Senator put together, and if you could
    answer those, we would really appreciate it.
        Senator Hatch. Okay. We will go to Senator Tillis.
        Senator Tillis. Thank you, Senator Hatch.
        Actually, I want to start with Mr. Beall. Actually, Mr.
    Beall, I want to thank Corning for a great presence in North
    Carolina, a great employer. I know a lot of the discussion has
    focused on the domestic trade secret protection, but can you
    talk a little bit about the differences and the challenges
    between domestic and foreign trade secret protection?
        Mr. Beall. Sure. Some of the challenges that we incur
    overseas are that it's very difficult for us to be able to
    obtain discovery over what has actually occurred within the
    facilities outside of the United States. So, typical--typical
    legal systems outside of the U.S. don't have an open discovery
    system, so it is difficult, in fact, impossible at times, to
    request information around what exactly is happening in the
    facility and obtaining that information. That's a frustration
    for us, because the opposite is not true, right? I mean, a
    foreign company can come to the United States and say, ``Hey, I
    think you stole my trade secret. I want to see what you are
    doing inside your facility,'' and based on the discovery laws,
    we've got to provide some information.
        So, we're playing a little bit with our hands behind our
    back in that regard, and that's why I think it is important as
    part of the activities in the bill that we have here to show
    that, hey, we are the gold standard, and we are putting
    ourselves out as the gold standard, and part of that is filling
    in this hole, if you will, where there's a no civil remedy
    today under Federal law, and filling that gap tells and sends a
    message to our trading partners, ``Hey, here's the way it
    should be done, this is the way it's done in the United States,
    and we would like to see it done overseas.'' It's very
    important to us because we do operate overseas, and we feel
    like we're at a bit of a disadvantage there.
        Senator Tillis. For Corning, how would you set the ratio in
    terms of the long-term threat assessment between domestic trade
    secret theft and foreign trade secret theft? Where is most of
    your concern?
        Mr. Beall. That's a good question. It is probably 60/40
    foreign to U.S.
        Senator Tillis. Would you expect that to grow over time.
        Mr. Beall. I think it will probably grow over time. I mean,
    trade secret is a problem around the world. Trade secret theft
    is a problem around the world, and oftentimes--it's a difficult
    question for me because oftentimes there is a U.S. component
    and there is a foreign component. And it's not just one
    country; it is many countries. So, it's a global problem for
    us, not any specific country per se.
        Senator Tillis. Okay. And in my remaining time, Ms.
    Cochran, in your opening comments you talked about the DTSA
    being a gold standard. Ms. Sandeen, in your opening comments
    you mentioned that it creates more problems than it solves.
    And, Mr. Pooley, I think you were generally supportive. So, in
    the time remaining, can you give me in about 45 seconds--we'll
    treat this like a debate. We will go right down the line,
    starting with Ms. Cochran and then ending with Mr. Pooley--why
    you think it's the gold standard and why you differ with maybe
    the comments made by Ms. Sandeen and vice versa?
        Ms. Cochran. I'm going to summarize, Senator, with the
    points that we have made. One, it's offering the Federal civil
    remedy. It is the United States taking the leadership in a very
    important issue, and hopefully other countries will follow. And
    then, finally, because time is of the essence in cases like
    this, to be able to take a step forward quickly to secure and
    prevent further dissemination of the information.
        Senator Tillis. Ms. Sandeen.
        Professor Sandeen. Thank you, Senator. The main reason is,
    as I mentioned, there is no Federal jurisprudence currently for
    civil trade secret. It will have to be developed by the Federal
    courts. The Federal courts are not being directed by the U.S.
    Congress in this bill to base their opinions on the UTSA,
    including the comments. That means that the Federal courts can
    choose between all manner of existing law from all manner of
    cases, first restatement, third restatement of unfair
    competition, et cetera. I think that will lead to less
    uniformity in the law of trade secrecy, not more.
        A better result might be to actually, you know, if this
    bill goes forward, is adopt a Federal Uniform Trade Secrets Act
    with all the commentary included, not just selected commentary.
        Senator Tillis. Mr. Pooley.
        Mr. Pooley. Thank you, Senator. All businesses, small and
    large, need this legislation to go forward because the nature
    of the threat has changed. This is a gold standard because it
    has been so carefully thought through to address both the need
    and the problems on the other side. I can say I have been
    present at execution of a search warrant in a trade secret
    case. These are not drug busts. When people get this kind of
    order delivered on them, they comply. And if it has been
    prepared properly, then we will get exactly what the law was
    intended to provide, which is preservation of that secret so it
    does not move and it does not get destroyed.
        Senator Tillis. Thank you. Thank you, Mr. Chair.
        Senator Hatch. Thank you, Senator Tillis. Senator Perdue,
    and this will be the end of the first round.
        Senator Perdue. Thank you, Senator Hatch, and I appreciate
    the forbearance of the witnesses. I just have a couple quick
    questions.
        In my business career, you know, running a multinational, I
    have fought this most of my career, and I understand the
    sensitivities and the direction that the courts need to take
    relative to instruction here. I am a Co-Sponsor of this bill. I
    want to further this debate. But I have a question today
    specifically. I think we have covered the topic today very
    well, but on the cyber threat, we've been doing a lot of work
    this Congress on cybersecurity in several areas, and a big part
    of the misappropriation of trade secrets today in my experience
    has been the growing cybersecurity infringement on this and the
    international nature of the threat. We talked about that a
    little bit, but I would like to get each of your perspectives
    on this. I think some of you have talked about it. I'd like to
    get a summary of this.
        I'd love you to talk about the extraterritoriality and how
    we can address this through this legislation, and what else do
    we need to consider as we talk about the cyber issues in
    addition to what the professor has talked about may be a
    shortcoming in the current legislation. Ms. Cochran.
        Ms. Cochran. Thank you, Senator. I don't want to
    disappoint, but I think our thought was that this is going to
    be an important piece of legislation for us, regardless of
    whether or not it's South Korea or it's South Carolina, where
    is the origin of the trade secret theft. So, the cases that we
    have been, you know, studying, that we have experienced in the
    last several years, that have been the basis for why we support
    this bill have not directly derived out of the cyber espionage
    aspect of it. So, for us, it is both the domestic and
    international facets.
        Senator Perdue. Thank you.
        Mr. Beall. I would agree with Ms. Cochran. We certainly see
    attempts at network penetration in our company. It's something
    that we deal with on a weekly basis, not a yearly basis. It
    occurs quite--quite prevalently. But our main concern here is
    in circumstances--and there're really two ways when we find out
    there is trade secret theft that has gone on.
        One I have already mentioned, which is when we know about a
    bad actor, he has quickly left the facility, and we have a
    limited period of time to access his whereabouts and obtain the
    information back.
        The second situation is in scenarios where we have
    suppliers who make parts of our apparatus for our critical
    businesses and our critical manufacturing, and those suppliers
    will call us, and we have a robust program in place where we
    educate the suppliers and say, ``Hey, if you see anything that
    looks like our stuff, please give us a call.'' And we often see
    the trade secret misappropriation coming through that angle
    where our suppliers will come to us and say, ``Somebody just
    gave us an order. It looks like it is Corning's drawings. What
    should we do about it?'' And so, we have really encouraged that
    kind of dialogue, and it has been very fruitful for us because
    then we can--could really address the problem head on.
        And another reason why I think this particular bill is
    helpful for us is it gives cross-jurisdictional discovery
    because our suppliers are all over the country.
        Senator Perdue. On that point--sorry to interrupt, and I
    want to get to the other two witnesses real quickly, but do you
    have any problems in communicating with competitors relative to
    that issue there in terms of what their experiences are and so
    forth? Are there any antitrust laws you run into in terms of
    discovery with a common provider providing similar equipment to
    a competitor that may be one of your--may be one your designs?
        Mr. Beall. Not too much, because our designs are so unique
    and customized, and this is part of the trade secret issue we
    have been talking about today, that it is very clear when
    somebody sees our design that it's ours. I mean, they might
    wipe off the Corning name on the design drawings, but
    ultimately there's a lot of telltale signatures that had to
    have been developed and were developed by Corning, we know who
    developed them, and so it's very easy for us in those instances
    to tell that this was--this was certainly something that came
    from Corning, was somehow misappropriated. And then it is up to
    us to try to figure out--put the pieces back together to figure
    out where the misappropriation occurred and try to correct
    that.
        Senator Perdue. Professor.
        Professor Sandeen. Thank you, Senator. I am very concerned
    about cyber espionage. I don't think this bill addresses that,
    however, and----
        Senator Perdue. No, it does not.
        Professor Sandeen. The main reason is, I think, we should
    address the bad act of cyber espionage directly rather than
    requiring the predicate fact being proven of the trade secrecy,
    because really what's going on is businesses whose systems are
    broken in care about a broader set of business information
    being taken or tampered with than the limited set of trade
    secrets that exist. And so, I wouldn't use this legislation to
    solve the cyber espionage problem.
        Mr. Pooley. Senator, if I might just add very quickly to
    that, I am glad you brought up extraterritoriality because it
    is one of the major reasons why we need to have Federal courts
    looking at these issues. Much more of the theft that happens
    these days, whether it's cybersecurity, cyber espionage, or
    whether it's done by actors locally who then might leave, the
    fact is there is an international component to it. State court
    judges, in my experience over the years, have a hard time
    dealing with this. Federal judges deal with international
    issues. The jurisdiction of courts here for the consequences of
    acts done in another place, they've seen that many times. They
    understand what comity is and isn't. And so, we can get much
    more predictable and effective relief in Federal court. Thank
    you.
        Senator Perdue. Thank you all. Thank you, Mr. Chairman.
        Senator Hatch. Well, thank you, Senator Perdue. Let me just
    ask a couple of questions here in the end. Let me ask you this,
    Mr. Pooley. Professor Sandeen noted in her oral statement----
        Senator Tillis. Mr. Chair, I see a couple people out there
    struggling to hear. I do not think they can hear very well.
        Senator Hatch. Yes, something is wrong with this mic. I
    will have to get a little closer.
        Professor Sandeen noted in her oral statement that the
    seizure provision is unprecedented in U.S. law. But isn't the
    provision in the bill modeled on the provision contained in the
    Lanham Act? And as you know, the Lanham Act has been used by
    the Federal courts for almost 70 years. Am I wrong on that?
        Mr. Pooley. Thank you, Senator. No, you are exactly right.
    The provisions of the DTSA relating to seizure were patterned
    directly on the Lanham Act and then taken from there and
    constrained as a result of the discussions with various
    stakeholders to make sure that applying these remedies in a
    trade secret case would not cause undue harm and would not
    involve third parties in the seizure.
        One of the most important things about the seizure
    provisions that keeps it contained is that it applies only to
    the trade secret misappropriator himself. Going into the cloud
    is not an issue. He has to be in possession of the secret. When
    that happens and the secret can be adequately described, then
    the court can act. These are--this makes it both similar to the
    Lanham Act on which it is based and much narrower in the sense
    that it is designed specifically for a trade secret situation.
        Senator Hatch. Okay. Now, you have also had a chance to
    review--or have you had a chance to review Professor Sandeen's
    recent blog post regarding your article on trade secrets. Would
    you care to respond to that.
        Mr. Pooley. Well, only in this sense, Senator. I would say
    that my experience in actually representing dozens and dozens
    of startups over the years presents a very different picture to
    me and what I've observed in terms of the overall threat and
    concerns. Startups have an equal interest in the robust
    protection of their trade secrets with larger companies and
    sometimes even more.
        One of the other things I disagree respectfully with the
    professor about is that somehow there is an idea in her writing
    and in this article that through this law we will be
    encouraging people to use trade secret protections, businesses
    to use it, and take them away from the patent system, which has
    a policy of disclosure. The patent system is not based on a
    public policy of disclosure. Disclosure is a price. The Supreme
    Court in Eldred v. Ashcroft told us this. It is a price exacted
    from the applicant--patent applicant in order to justify the
    quasi-monopoly that the applicant is given.
        The objective of the patent law is to encourage innovation
    and the progress of the useful arts, and as the Supreme Court
    told us in Kewanee back in 1974, that is exactly the purpose of
    the trade secret laws as well. They get there through a
    different route. But if we didn't have secrecy, we wouldn't
    have the dissemination of information that is made possible
    through collaborations and licensing. It is absolutely
    necessary to make that happen. Thank you.
        Senator Hatch. Okay. I appreciate that clarification. Ms.
    Cochran and Mr. Beall, how do you respond to arguments that the
    proposed legislation will limit the diffusion of information
    and knowledge? Go ahead. Ms. Cochran, we will go with you first
    and then Mr. Beall.
        Ms. Cochran. We don't believe that that is an issue,
    Senator. We utilize both patents which publish and trade
    secrets, and some of the trade secret information that we keep
    is not even available under patent law because it doesn't meet
    patent law requirements. So, it's just another mechanism for
    us, and we disseminate a lot of information through the patent
    system that just so happens to publish as well.
        Senator Hatch. Do you agree with that, Mr. Beall.
        Mr. Beall. I do agree with that, Senator. We at Corning
    take a look at protections both under the patent law as well as
    under trade secret protection. And I mean, the types of things
    that are critical--in fact, some of Corning's greatest
    inventions have been process engineering, dropping the cost of
    a particular product sale. And we could be talking about things
    so much as turning a certain dial or the particular angle that
    glass flows from one part of our process to another. And these,
    you know, these are the types of things that are absolutely
    critical to how we operate, things we've learned over years. If
    there's a certain breakdown in the process, we know exactly how
    to fix it immediately. And these are--you know, as Ms. Cochran
    mentioned, these are things that are not necessarily amenable
    to patent protection, but certainly critical for trade secret
    protection.
        Senator Hatch. We will go into the second round, and I have
    to leave, but we will turn to my colleague/Co-Sponsor Senator
    Coons, and then Senator Tillis has offered to help here and
    continue the discussion.
        Senator Coons. Great. Thank you very much, Senator Hatch. I
    just have a few questions. I wanted to touch on two or three
    things to round out some of the previous exchanges. And as he
    is leaving, I want to thank Senator Hatch again for his
    leadership on working so hard on this bill.
        Professor Sandeen, if I might just follow-up on the
    question Senator Hatch just had about information diffusion,
    you just posted something on a blog entitled ``Patently O''
    that summarizes your opposition to the bill as being rooted in
    your seeing IP issues through the lens of information
    diffusion. And if I understand correctly, that's summarized
    best perhaps by saying that rather than seeing strong
    protections, you favor disclosure, quote, ``because society
    benefits when trade secrets leak out.''
        Is it really your view that the loss of trade secrets by a
    U.S. company is a good thing? Help me understand how this
    advantages American innovation and manufacturing.
        Professor Sandeen. Thank you, Senator. I didn't make up
    that language. It came from the U.S. Supreme Court case in
    Kewanee that described trade secret protection as being like a
    sieve. And the point that the Court made in that case and the
    whole reason why States' trade secret law was not preempted was
    because it was weak. And what the U.S. Supreme Court said, and
    I think rightly, is that when trade secrets are weak, it then
    forces companies like DuPont and Corning to make an important
    decision, which is; do we protect things by patent law or do we
    protect them by trade secret?
        I acknowledge that some things cannot be protected by
    patent because they have already been invented, for instance,
    or because they wouldn't fall within patentable subject matter.
    But the point is that the stronger you make trade secret, the
    greater the choice companies will make to protect things as
    trade secrets rather than patents. When that happens, the
    disclosure of inventions that occurs when patents are published
    will end. And I happen to believe strongly that intellectual
    property policy needs to be balanced so you give companies the
    incentive that Mr. Pooley talked about, but not a de facto
    monopoly forever, because ultimately society benefits when
    companies can learn from public knowledge and develop competing
    businesses which actually provide competing products that might
    be better and at lesser cost.
        So, it's a balance, and I think we have to be careful about
    that balance.
        Senator Coons. Well, if I might, Ms. Sandeen, Mr. Pooley,
    in that abstract commitment to a balance between the diffusion
    of information and the free market of ideas and information
    wanting to sort of seek its best owner and a legal system where
    we are also trying to protect American invention, innovation,
    competitiveness, and manufacturing, how do you view the
    appropriate balance between trade secret and IP?
        Mr. Pooley. Thank you, Senator. There are people who
    believe that information should be free, generally, and I think
    there is more and more of them. But that is definitely not what
    the Supreme Court said in Kewanee. It is a brilliant decision,
    actually, in many ways because it speaks precisely to this
    balance. How can we have a system that, on the one hand,
    demands disclosure as the price for this quasi-monopoly and, on
    the other hand, allows secrets to be maintained? And the Court
    explained it very, very well, and it's the difference between
    whether information can leak and, therefore, the trade secret
    protections are relatively weaker or whether they should leak,
    which is the position, I understand, of a few economists and
    law professors. But I do not hold that. And the Supreme Court
    in Kewanee made it the choice of those who develop valuable
    information to choose one path or the other as best suits them
    to get the information out to the marketplace for the benefit
    of the public. Sometimes that is through a patent, but very,
    very often, and increasingly these days, it is through secrecy.
        Senator Coons. Well, I am very concerned about American
    manufacturing and maintaining our competitiveness, and private
    sector investment in R&D related to manufacturing is the
    overwhelming majority of R&D in this country. And we've heard
    two compelling examples of the manufacturing of world-class
    products that would leave our shores tomorrow if the
    information embodied in the trade secrets developed over
    decades in the manufacture of Kevlar and fiber optic cable were
    truly free.
        Let me ask one last question, if I might, given the
    limitations of time. Mr. Pooley, I was concerned last year when
    the professors raised an argument that our bill could be used
    to impair employee mobility, and I think some other Members
    today have expressed concerns that perhaps this could be used
    to harass employees who are seeking to leave an employer.
    That's the last thing that Senator Hatch or I wanted to do, is
    to impair employee mobility, particularly in high-performing
    engineering fields, and so we included specific language in the
    bill this year that protects an employee's right to move from
    company to company. And you have certainly litigated many cases
    on both sides of that question. Do you think we have gotten it
    right?
        Mr. Pooley. Thank you, Senator. Yes, you have. The language
    that's used in the DTSA is the same as the language in the
    Uniform Trade Secrets Act. So, if we have an employee mobility
    problem by the enforcement of trade secret laws in this act,
    well, we already have it in 47 of the 50 States in the U.S. All
    of those States allow injunctions against threatened
    misappropriation. And I think the language that you have added
    to the bill this time provides an additional and very
    significant level of comfort that Federal judges in particular
    are not going to get themselves involved in trying to do
    anything other than to protect the integrity of the information
    that might be moving from one place to another. It's not in
    their province, and certainly they've been directed through the
    language that you have so wisely chosen here not to let this
    spill over into side disputes about noncompete covenants and
    the like. We will have the same standard apply here that has
    been applied through the Uniform Act along with, as I say, the
    additional level of comfort, and I think that will make sure we
    do not have these problems.
        Senator Coons. Well, thank you very much, Mr. Pooley,
    Professor Sandeen, Mr. Beall, and Ms. Cochran. Thank you for
    your testimony today, and thank you for the second round of
    questions.
        Senator Tillis [presiding]. Thank you, Senator Coons. I was
    actually going to go to an Agriculture Committee hearing, and I
    stepped out, but I decided to come back because there was just
    something else I wanted to talk about.
        I was--early in my career, I was in product management and
    later research and development role manager in the high-tech
    sector back in the `80s. What we would do, if we were going to
    move forward with a major R&D initiative, is we would have to
    come together, determine really whether the goal was
    achievable, how much it was going to cost, and what length of
    time would we potentially have a competitive advantage to
    justify whether or not we ever make that investment. If we
    don't get this right, it will have a chilling effect on America
    continuing to be the leading innovator in the world.
        Earlier this week, the President gave a speech where he
    started out saying ``American ingenuity,'' corrected himself
    and said ``human ingenuity.'' I think that's nonsense. I think
    that we need to continue to recognize that America is the
    greatest innovator, the greatest and most innovative Nation
    that has ever existed. And part of the reason why we do that is
    we provide certainty to businesses to be able to make the kinds
    of investments that give us that disruptive capability,
    technological advantage, whether it's high-tech,
    pharmaceuticals, agriculture, no matter what. When we start
    having a discussion about the distribution or diffusion of
    knowledge, I read that as knowledge redistribution like wealth
    redistribution. It's not a good thing to do.
        And a lot of people will say, well, this is a Senator
    talking about protecting these big businesses that just abuse
    their competitive advantage. First, I think that's nonsense. I
    am more concerned with the guys that just came out of college,
    and gals, who are putting their mortgage behind an innovative
    idea and shortening the horizon for the length of time that
    they can benefit from the huge personal risk that they have
    taken. That's what we have to work on in this bill.
        I am also concerned with the fact that you've got a 60/40
    mix today, 60 percent being foreign. That's going to grow. And
    I think our future trade agreements need to make it very clear
    that these nations that want free trade with the United States
    better level the playing field in terms of what we can do to
    protect our intellectual property.
        So, that was less of a question, more of a statement. I
    would be happy to have you all react to it. But I think that is
    very important for us to be grounded in how this sort of
    policy--and I understand Ms. Sandeen's concerns, and I think we
    should continue to work to address some of them. But
    foundational to this legislation is protecting the intellectual
    property of the sum total of businesses that happen to be in
    the greatest and most innovative Nation that's ever existed.
    And I am going to do everything that I can in this Committee
    and as a Senator to make sure that we get to that end.
        And Ms. Cochran, I would be happy to have you all make
    closing statements, and we will carry the Committee to its
    closure.
        Ms. Cochran. Thank you, Senator. I think your points are
    well taken. Those are exactly the sentiments that DuPont has
    had. We also recognize and it should be noted that we invest a
    lot to find out if someone has stolen our trade secrets, which
    is not a free----
        Senator Tillis. And at the expense of investing in more
    innovation.
        Ms. Cochran. That is exactly right. We would rather put it
    into the R&D. Thank you.
        Senator Tillis. Mr. Beall.
        Mr. Beall. I would also agree with your statements and
    appreciate those, Senator. My job at Corning is to protect
    intellectual property. That's the lifeblood of our company. And
    anything that we can have, any new tools to help achieve that
    goal are absolutely welcome, and that's why we support this
    bill.
        We spend an inordinate amount of money on research and
    development, and as you said, we do it because we want to
    advance the technology. But we don't do it because we want
    somebody else to take a free ride on the work and the money we
    have spent to accomplish and produce the kind of products we
    have.
        Senator Tillis. Yes. Ms. Sandeen, I don't want you to take
    me dismissing some of what I think are your very valid
    comments. I think that there are forums where we clearly see
    the diffusion of information and knowledge as a plus. Open
    source is a classic example of that. But I think there are
    other instances where the nature of the product and the nature
    of the technology lends itself to one to where you really want
    to encourage the protection of the key innovators and make sure
    that that's the bedrock of our process. I just wanted to make
    sure you didn't think everything you said I disagreed with,
    just a few points.
        Professor Sandeen. Well, Senator, I do not disagree with
    what you just said. My concern is that not every company in the
    United States is like DuPont and Corning or the other Sponsors
    of this bill, which have--know what a trade secret is, know how
    to identify it, know how to engage in reasonable efforts to
    maintain secrecy. There are a lot of companies out there that,
    frankly, do not know or even think they have a trade secret
    until they go to an attorney like Mr. Pooley who tells them
    they might have a trade secret, and then they file litigation.
        My concern is when that litigation--and most of it's filed
    against employees, former employees--is brought against former
    employees and they had no notice or little notice on what the
    trade secrets were. We have a situation now that those
    employees can be thrown into Federal prison when they didn't
    even know what a trade secret was.
        And so, one of the things we might consider in the
    legislation is beefing up and being more specific about what
    steps employers, companies should take before they can bring a
    Federal cause of action. That might eliminate some of these
    weak cases from being made into a Federal case. Thank you.
        Senator Tillis. Thank you. Mr. Pooley.
        Mr. Pooley. Senator, first of all, I'd like to thank you
    for your remarks with which I wholeheartedly agree. Back when I
    started in this field in the 1970s, the only thing that a
    company really needed to do to protect its competitive edge was
    guard the photocopier and watch who went in and out the front
    door. And I think we can all see how times have changed. And
    these trade secrets are--it's just a term that we apply to
    exactly what you are talking about, the kind of information
    that gives us our competitive edge as a Nation.
        We owe it to the people who produced that information to
    give them the most effective tools that we can to make sure
    that the integrity of that information is protected so that it
    can return benefits to the public at large and to those who
    created it in the first place. This legislation just gives them
    a choice to go to Federal court where they can get that kind of
    protection. Thank you, Senator.
        Senator Tillis. I want to thank all the witnesses for being
    here. It's been very informative. I think it is instructive to
    a bill that I have Co-Sponsored and I look forward to working
    with Senator Coons and Senator Hatch on.
        We will leave the record open for a week so that other
    Members may submit questions. We would appreciate your
    indulgence on that and any other information you would like to
    provide. This hearing is adjourned. Thank you.
        [Whereupon, at 11:52 a.m., the hearing was adjourned.]
        [Additional material submitted for the record follows.]

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                                A P P E N D I X

                                       to

                      PROTECTING TRADE SECRETS: THE IMPACT
                            OF TRADE SECRET THEFT ON
                          AMERICAN COMPETITIVENESS AND
                             POTENTIAL SOLUTIONS TO
                                REMEDY THIS HARM

    The following submissions are available at:

      https://www.govinfo.gov/content/pkg/CHRG-114shrg52555/pdf/CHRG-
        114shrg
        52555-add1.pdf

    Submitted by Senator Cornyn office:

     Defend Trade Secrets.............................................     2
     Santa Clara University School of Law.............................     8
     Various Professors, letter.......................................    15

    Submitted by Senator Grassley office:

     American Bar Association.........................................    38
     American Intellectual Property Law Association...................    40
     Corporate Counsel................................................    42
     Intellectual Property Owners Association (IPO)...................    46
     Krotoski, Mark L., statement.....................................    47
     National Alliance for Jobs and Innovation........................    99
     Organizations for Support of Defend Trade Secrets Act............   101
     Sigall, Jule, letter.............................................   104
     The Recorder.....................................................   106

    Submitted by Senator Leahy office:

     Defend Trade Secrets Act.........................................   110

                                     [all]