[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
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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
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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
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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.]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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]