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88–436 PDF 2014

TRADE SECRETS: PROMOTING AND PROTECTING 

AMERICAN INNOVATION, COMPETITIVENESS 

AND MARKET ACCESS IN FOREIGN MARKETS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

COURTS, INTELLECTUAL PROPERTY, 

AND THE INTERNET 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

JUNE 24, 2014 

Serial No. 113–97 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 
(II) 

COMMITTEE ON THE JUDICIARY 

BOB GOODLATTE, Virginia, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

HOWARD COBLE, North Carolina 

LAMAR SMITH, Texas 

STEVE CHABOT, Ohio 

SPENCER BACHUS, Alabama 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

RAU ́ L LABRADOR, Idaho 

BLAKE FARENTHOLD, Texas 

GEORGE HOLDING, North Carolina 

DOUG COLLINS, Georgia 

RON DeSANTIS, Florida 

JASON T. SMITH, Missouri 

[Vacant] 

JOHN CONYERS, JR., Michigan 

JERROLD NADLER, New York 

ROBERT C. ‘‘BOBBY’’ SCOTT, Virginia 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

JUDY CHU, California 

TED DEUTCH, Florida 

LUIS V. GUTIERREZ, Illinois 

KAREN BASS, California 

CEDRIC RICHMOND, Louisiana 

SUZAN DelBENE, Washington 

JOE GARCIA, Florida 

HAKEEM JEFFRIES, New York 

DAVID N. CICILLINE, Rhode Island 

SHELLEY HUSBAND, Chief of Staff & General Counsel 

PERRY APELBAUM, Minority Staff Director & Chief Counsel 

SUBCOMMITTEE ON COURTS, INTELLECTUAL PROPERTY, AND THE INTERNET

HOWARD COBLE, North Carolina, Chairman 

TOM MARINO, Pennsylvania, Vice-Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

LAMAR SMITH, Texas 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

TED POE, Texas 

JASON CHAFFETZ, Utah 

BLAKE FARENTHOLD, Texas 

GEORGE HOLDING, North Carolina 

DOUG COLLINS, Georgia 

RON DeSANTIS, Florida 

JASON T. SMITH, Missouri 

[Vacant] 

JERROLD NADLER, New York 

JOHN CONYERS, JR., Michigan 

JUDY CHU, California 

TED DEUTCH, Florida 

KAREN BASS, California 

CEDRIC RICHMOND, Louisiana 

SUZAN DelBENE, Washington 

HAKEEM JEFFRIES, New York 

DAVID N. CICILLINE, Rhode Island 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

STEVE COHEN, Tennessee 

JOE KEELEY, Chief Counsel 

HEATHER SAWYER, Minority Counsel 
(III) 

C O N T E N T S 

JUNE 24, 2014 

Page 

OPENING STATEMENTS 

The Honorable Howard Coble, a Representative in Congress from the State 

of North Carolina, and Chairman, Subcommittee on Courts, Intellectual 

Property, and the Internet .................................................................................. 1 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, Ranking Member, Committee on the Judiciary, and 

Member, Subcommittee on Courts, Intellectual Property, and the Internet .. 2 

The Honorable Bob Goodlatte, a Representative in Congress from the State 

of Virginia, and Chairman, Committee on the Judiciary ................................. 3 

The Honorable Jerrold Nadler, a Representative in Congress from the State 

of New York, and Ranking Member, Subcommittee on Courts, Intellectual 

Property, and the Internet .................................................................................. 4 

WITNESSES 

Richard A. Hertling, Of Counsel, Covington & Burling LLP, Protect Trade 

Secrets Coalition 

Oral Testimony ..................................................................................................... 7 

Prepared Statement ............................................................................................. 10 

David M. Simon, Senior Vice President for Intellectual Property, 

salesforce.com Inc. 

Oral Testimony ..................................................................................................... 21 

Prepared Statement ............................................................................................. 23 

Thaddeus Burns, Senior Counsel, Intellectual Property & Trade, General 

Electric 

Oral Testimony ..................................................................................................... 33 

Prepared Statement ............................................................................................. 35 

Chris Moore, Senior Director, International Business Policy, National Association of Manufacturers 

Oral Testimony ..................................................................................................... 44 

Prepared Statement ............................................................................................. 46 

LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING 

Material submitted by the Honorable Doug Collins., a Representative in 

Congress from the State of Georgia, and Member, Subcommittee on Courts, 

Intellectual Property, and the Internet .............................................................. 68 

(1) 

TRADE SECRETS: PROMOTING AND 

PROTECTING AMERICAN INNOVATION, 

COMPETITIVENESS AND MARKET ACCESS 

IN FOREIGN MARKETS 

TUESDAY, JUNE 24, 2014 

HOUSE OF REPRESENTATIVES

SUBCOMMITTEE ON COURTS, INTELLECTUAL PROPERTY, AND THE INTERNET

COMMITTEE ON THE JUDICIARY

Washington, DC. 

The Subcommittee met, pursuant to call, at 2:49 p.m., in room 

2141, Rayburn House Office Building, the Honorable Howard Coble 

(Chairman of the Subcommittee) presiding. 

Present: Representatives Coble, Marino, Goodlatte, Issa, Holding, 

Collins, DeSantis, Nadler, Conyers, Chu, DelBene, Jeffries, Cicilline, and Lofgren. 

Staff Present: (Majority) Vishal Amin, Counsel; Olivia Lee, Clerk; 

(Minority) Heather Sawyer, Minority Counsel; and Jason Everett, 

Counsel. 

Mr. COBLE. The Subcommittee on Courts, Intellectual Property, 

and the Internet will come to order. 

Without objection, the Chair is authorized to declare recesses of 

the Subcommittee at any time. 

I want to additionally apologize to all of you for the delay. We 

had several House votes. They do come—claim precedence over the 

rest of us, so thank you all for understanding. 

I will give my opening statement now. The intellectual property 

comes in a variety of flavors. This Subcommittee works regularly 

on issues concerning patents, trademarks, and copyrights when 

considering IP in both the domestic and international context, but 

today we are here to talk about trade secrets. Trade secrets are another important part of the IP landscape. 

For example, one of the most famous trade secrets in the world 

is the formula for Coca-Cola, and I am being very provincial now, 

but I am certain that there are a number of Carolina BBQ spices 

as well. Hopefully. 

Trade secrets require no formal registration and can be protected 

for an unlimited time, but unlike patent protection, once a trade 

secret is disclosed, it instantly loses its value and the property 

right itself ceases to exist. 
2 

Further, there is no protection if a trade secret is uncovered unlawfully by others through reverse engineering or independent development. So there are definite tradeoffs between secured patent 

protection or could be an innovation of a trade secret. The United 

States has many laws in place to protect trade secrets, and in fact, 

we passed two trade secret bills during the last Congress; one fixing a loophole regarding computer source code and the other involved some criminal penalties for economic espionage. And as 

folks consider other ideas, in the future, we need to be mindful of 

unintended consequences and ensure that improvements to the 

code are meaningful and necessary and not being done simply because we can do it. 

But as our companies operate on a global scale, at issue, most 

pressing concern to Congress is how certain foreign governments 

have begun adopting policies that determine trade secret protection 

and create an unlevel playing field for America’s most innovative 

companies. Six countries promote trade secret theft by producing 

policies that result in forced technology transfer. These trade-distorted policies may seem benign but are nothing more than legalized theft, it seems to me, since policies force U.S. companies to 

provide trade secret information to a local partner or government 

agency as a condition of investment or market access. 

Some countries have begun looking for a compulsory licensing of 

trade secrets to a third party. This is done to help a local competitor that claims it needs access to the trade secret to compete. Generally, this is just not right, it seems to me. The Administration 

needs to be using all of its trade tools, including action at the 

WTO, to help ensure that countries that promote such policies are 

held to account. I hope to hear more today from our witnesses in 

the steps that need to be taken to promote trade secret protection, 

America’s—American innovation, economy, and create jobs. 

I am now pleased to recognize the distinguished gentleman from 

Michigan, Mr. Conyers, for his opening statement 

Mr. CONYERS. Thank you, Chairman Coble. 

I join in welcoming the witnesses and look forward to this hearing. We are examining the trade secret laws and consider whether 

there should be revisions or updates in the law. 

Let me say that copyright, patent, and trademark owners can enforce their rights in Federal court. Trade secret owners should have 

a similar remedy. Indeed, trade secrets are critical intellectual 

property rights and should receive protection of Federal laws in addition to the State laws that have traditionally protected them. 

People are now able to travel across the State and national borders more easily, and many United States companies are finding 

that reliance on State laws and procedures is no longer adequate 

for trade secret protection. The inability of private parties to protect trade secrets in Federal court has generated calls for legislation to create such a right. Those who support such a right have 

noted that a Federal cause of action would give companies a critical 

tool to enforce their rights. A Federal civil cause of action would 

create national standards and allow companies to craft one set of 

nondisclosure policies on a 50 State basis. 

I want to hear the witnesses discuss the benefits and potential 

down side of a Federal cause of action as well as any specific issues 
3 

that we should address in such legislation. We should consider 

what we can do to bolster the Administration’s efforts to increase 

protection for trade secrets at home and abroad. 

In 2013, the Administration, through the U.S. Intellectual Property Enforcement Coordinator, released the Administration strategy on mitigating the theft of U.S. trade secrets, a five-pronged 

strategic approach to addressing trade secret theft. That secret 

strategy calls for coordinated international engagement with trading partners, promotion of voluntary best practices by private industry, enhancement of domestic law enforcement operations, improvement of domestic legislation regarding trade secrets, and increased public awareness. The Administration also has expressed 

concerns about new reports, suggesting that some countries, most 

notably China, are playing an increasingly active role in theft of 

U.S. trade secrets. In response, the Administration has increased 

its enforcement efforts in this area as well. 

In May of this year, for example, the Justice Department indicted five Chinese military hackers for economic espionage and 

trade secret theft for ongoing offenses involving six American companies. That indictment is a step in the right direction, but of 

course, much more remains to be done. 

I look forward to hearing more about this from our witnesses and 

what we can and should do to strengthen trade secret laws. I thank 

the Chairman and yield back the balance of my time. 

Mr. COBLE. I thank the gentleman. 

The Chair recognizes the distinguished gentleman from Virginia, 

the Chairman of the House Judiciary Committee, Mr. Goodlatte for 

an opening statement 

Mr. GOODLATTE. Thank you, Mr. Chairman. 

Today we examine an important area of intellectual property 

trade secrets. Trade secrets occupy a unique place in the IP portfolios of our most innovative companies. They can include confidential formulas, manufacturing techniques, and even customer lists, 

but because they are unregistered and not formally reviewed like 

patents, there are no limitations on discovering a trade secret by 

fair lawful methods, such as reverse engineering or independent 

development. In innovative industries, that is simply the free market at work. 

Though trade secrets are not formally reviewed, they are protected from misappropriation, which includes obtaining the trade 

secret through improper or unlawful means. And misappropriation 

can take many forms, whether it is an employee selling blueprints 

to a competitor or a foreign agent hacking into a server. In addition, one could argue that even a foreign government’s policies to 

require forced technology transfer is a form of misappropriation. 

Though most States base their trade secret laws on the Uniform 

Trade Secrets Act, the Federal Government protects trade secrets 

through the Economic Espionage Act. 

In the 112th Congress, this Committee helped enact two pieces 

of legislation to improve the protection of trade secrets. As other 

ideas are developed to improve trade secrets protection, it is important that we take the time to ensure that any new measures do not 

increase frivolous litigation or discovery costs, do not negatively impact our international trade obligations, or result in other negative 
4 

unintended consequences, and that any measure ultimately provides a meaningful benefit to innovators and innovative companies. 

On the international front, the theft of trade secrets does not just 

come from the employee theft or industrial and economic espionage 

but also from foreign governments themselves. Some of it is plain 

cyber theft, but many countries have also begun adopting policies 

that severely undermine trade secrets. These policies, invariably 

designed to promote local innovation, result in forced technology 

transfers that open American companies to the blatant theft of 

their intellectual property. These trade distortive policies are antiinnovation, anti-competitive, and prevent fair market access in foreign markets. 

If a country requires technology transfer as a condition for regulatory approval or market access, that is wrong. If a country uses 

their State-owned enterprises to seek noncommercial terms from 

American companies for their IP, that is wrong. Such policies 

amount to legalized theft. In the 2014 U.S. Trade Representatives 

Special Report 301—Special 301 Report, China was specifically 

called out to take serious steps to put an end to these activities and 

to deter further activity by rigorously investigating and prosecuting 

trade secret thefts conducted on by both cyber and conventional 

means. 

When a country fails to provide basic legal protections for intellectual property, then we need to start thinking outside the box, 

looking at all of our trade tools. We need to start thinking creatively, utilizing our IP Attache ́s in U.S. Embassies, ensuring they 

have sufficient authority and resources, and we need to start considering our options for actions at the WTO. 

Intellectual property powers the engine of American innovation 

and creativity. It creates new jobs and helps grow our economy. I 

look forward to hearing from all of our witnesses on the issues surrounding trade secrets. 

Thank you, Mr. Chairman. 

Mr. COBLE. I thank the gentleman. 

The Chair now recognizes the distinguished gentleman from New 

York, the Ranking Member of the Subcommittee, Mr. Nadler. 

Mr. NADLER. Thank you, Mr. Chairman, for holding this hearing 

to examine the ongoing importance of trade secrets as a means of 

safeguarding intellectual property interests at home and abroad. 

With the need to focus on patent reform last year and the ongoing 

comprehensive review of the Copyright Act, it would be easy to neglect trade secrets, but doing so would be a major mistake. 

Trade secrets proprietary business information derives its value 

from being and remaining secret, make up approximately twothirds of the value of U.S. companies’ information portfolios. American businesses own an estimated $5 trillion of trade secrets with 

roughly $300 billion of that stolen per year; $300 billion worth of 

theft a year. 

In a 2012 speech, former national security director Keith Alexander described cyber espionage as the greatest transfer of wealth 

in history, and many businesses view trade secret protection as 

more critical than any other form of intellectual property protection. The 2008 National Science Foundation survey, for example, 

show that firms with significant research and development activity 
5 

reported trade secrets as the most important form of intellectual 

property protection. Even companies without R&D activity rank 

trade secrets as the second most important form of intellectual 

property protection, only slightly behind trademarks and ahead of 

copyrights and patents. 

The value of trade secrets to U.S. companies is matched only by 

their tremendous vulnerability to theft. Innovative technologies 

have made it easy to obtain information and transfer it across the 

globe with the click of a cell phone, tablet, or computer key. At the 

same time, U.S. companies are increasingly targeted for trade secret theft by competitors with some foreign governments actively 

encouraging and facilitating the theft of U.S. trade secrets. 

Just this mast May, for example, the Justice Department 

charged 5 members of the Chinese military with economic espionage. The defendants are accused of targeting six American companies and conspiring to steal information useful to competitors in 

China, including enterprises owned by the Chinese government. 

This indictment represents a mere tip of the iceberg. According to 

FBI Director James Comey, while this case is an important step 

forward, ‘‘There are many more victims, and there is much more 

to be done.’’ 

In light of their value and vulnerability, it is critical that our 

laws provide robust protection for trade secrets. Unfortunately, 

that does not seem to be the case. What we increasingly hear— 

what we increasingly are hearing from a diverse array of companies ranging from traditional manufacturers to leading-edge technology firms is that that lackluster legal protection is a major 

cause of concern. Congress has acted before to protect trade secrets 

at the Federal level. In 1996, we passed the Economic Espionage 

Act in response to increased incidents against American companies, 

and just this last Congress, we took steps to improve this law, closing a loophole that allowed the theft of certain trade secrets and 

increasing penalties for economic espionage. The Economic Espionage Act publishes trade secret theft and economic espionage, 

which is a misappropriation of trade secrets for the benefit of a foreign power. 

The EEA can only be enforced by the Attorney General. There 

is no Federal cause of action for a private party seeking to enforce 

the law. As of 2008, fewer than 60 prosecutions had been brought, 

leading to concern that the act is an ineffective weapon against economic espionage. 

Lacking a Federal cause of action, companies currently use State 

laws to protect trade secrets. While these laws were initially developed through particular case decisions in their articulation of governing American principles by the American Law Institute, nearly 

every State has now enacted the Uniform Trade Secrets Act. The 

Uniform Act provides key definitions in a civil cause of action for 

misappropriation of trade secrets. A prevailing party may obtain 

injunctive relief, damages, and reasonable attorney’s fees in certain 

cases. 

While this system appears to have worked relatively well for 

local and intrastate disputes, it has not proven efficient or effective 

for incidents that cross State and sometimes international borders. 

As you will hear from our witnesses today, our 50 State system 
6 

does not work in our increasingly mobile and globally interconnected world. Former employees and industrial spies are likely 

to carry or transfer secret information across State borders or overseas. 

The limited jurisdiction of the State court system makes it more 

difficult to obtain discovery or to act quickly enough to enforce an 

order that might stop the immediate loss of company secrets. As a 

result, our witnesses, who represent a wide range of key stakeholder interests, all support creation of a Federal cause of action 

for trade secret theft. Along with several of my colleagues on both 

sides of the political aisle, I similarly favor doing and we are working on, legislation to achieve this. 

It would be helpful to hear from our witnesses today regarding 

any particular issues that should be addressed or avoided in such 

a bill. I believe that we have an opportunity to work quickly and 

in a broadly bipartisan basis to ensure that our trade secrets law 

more robustly protects America’s innovators and businesses. We already protect trademarks, copyrights, and patents through civil— 

through Federal civil remedies. It is time to do the same for trade 

secrets. 

With that, I look forward to hearing from our witnesses today, 

and I yield back the balance of my time. 

Mr. COBLE. I thank the gentleman for his opening statement. 

Statements from all other Members of the Subcommittee will be 

entered into the record without objection. 

The witnesses written statements will be entered into the record 

in its entirety as well. 

Gentlemen, prior to introducing you, I would like for you to stand 

and be sworn, if you will. 

[Witnesses sworn.] 

Mr. COBLE. Let the record reflect that all responded in the affirmative. You may be seated. 

We have a very distinguished panel today, and I am pleased to 

welcome you with us. I, again, apologize for the belated response. 

Our first witness this afternoon is Mr. Richard Hertling, Counsel 

of the Washington law firm of Covington & Burling, LLP. He is 

here today to testify on behalf of the Protect Trade Secrets Coalition. In his position, Mr. Hertling advises clients in the technology, 

intellectual property, and defense of cybersecurity legislative matters. Prior to his position at Covington, Mr. Hertling served this 

Committee with distinction for almost 5 years, most recently as 

Staff Director and Chief Counsel. He has also held numerous leadership positions in the Department of Justice and the U.S. Senate 

throughout his 23-year career in the Federal Government. He was 

awarded his J.D. degree from the University of Chicago School of 

Law and his bachelor’s degree, magna cum laude with honors, from 

Brown University. We welcome Mr. Hertling back to the Committee and back to the Hill. 

Our second witness, Mr. David Simon, Senior Vice President of 

Intellectual Property of Salesforce.com. In his position, Mr. Simon 

is responsible for the company’s intellectual property portfolio 

worldwide. Prior to his position at Salesforce.com, he served as 

Chief Patent Counsel at Intel Corporation and Vice President of IP 

Strategy and Licensing at Rovi Corporation. Mr. Simon received 
7 

his J.D. degree from Georgetown University Law Center and his 

S.B. in Electrical Engineering and Political Science from the Massachusetts Institute of Technology. 

Mr. Simon, good to have you with us as well. 

Our third witness is Mr. Thaddeus Burns, member of the Trade 

Secrets Committee at IPO, the Intellectual Property Owners Association. IPO focuses on providing practical education on the topic 

of trade secrets to the organization’s membership and to the public. 

Mr. Burns is currently Senior Counsel for Intellectual Property and 

Trade at General Electric. Prior to GE, he has served as Senior 

Counsel at Akin, Gump, Strauss, Hauer & Feld, the Intellectual 

Property Attache ́ in Geneva with USPTO and a law clerk with the 

U.S. Court of Appeals for the Fourth Circuit. Mr. Burns received 

his J.D. from the Catholic University of America, Columbus School 

of Law and his bachelor degree from Oberlin College. 

Mr. Burns, good to have you with us. 

Our final witness is Mr. Christopher Moore, Senior Director of 

International Business Policy at the National Association of Manufacturers. Prior to his position at NAM, Mr. Moore served as Director of Strategic Planning and Deputy Director of Policy with the 

United Nations World Food Programme. He also held senior positions in the State Department and the Office of the U.S. Trade 

Representative. He is an alumnus of Emory University and the 

London School of Economics. 

Mr. Moore, good to have you with us. 

Gentlemen, you will note there is a timing machine on your 

table, and we would ask for you to comply with the 5-minute rule, 

if you can. When the green light changes to amber, that is your notice that you have 5 minutes on which to wrap up. You won’t be 

severely punished if you don’t make that minute cut, but do the 

best you can. 

Mr. Hertling, we will start with you. 

TESTIMONY OF RICHARD A. HERTLING, OF COUNSEL, COVINGTON & BURLING LLP, PROTECT TRADE SECRETS COALITION 

Mr. HERTLING. Thank you very much, Chairman Coble, Ranking 

Member Nadler, Ranking Member Conyers. Thank you for inviting 

me to testify before this Subcommittee today on trade secrets. It is 

indeed a distinct honor and privilege for me to be here to discuss 

this important topic. I appreciate that my written statement will 

be included in the record of the hearing, and I will focus my oral 

testimony on the background to the existing Federal legal landscape on trade secrets, as Committee staff requested. 

My firm represents the Protect Trade Secrets Coalition, a crossindustry-sectors coalition of companies supporting legislation to 

complement the criminal penalties provided by the Economic Espionage Act of 1996 and protect the property interest that exists in 

trade secrets by creating a Federal civil remedy for trade secret 

misappropriation, similar to the remedies available for other forms 

of intellectual property. 

As you know, immediately prior to joining Covington & Burling, 

I was staff director of this Committee, but among the matters with 

which I was involved earlier in my congressional career was the 
8 

bill that became the Economic Espionage Act of 1996. As far back 

as the mid-19th century, State common law provided protection of 

state—of trade secrets from misappropriation, and the traditional 

means of enforcing the law has been through a private civil lawsuit. Trade secrets, as several members have described, are commercially valuable information subject to reasonable measures to 

protect the confidentiality of that information. 

The protection of trade secrets in the United States has been left 

largely to State laws. The ad hoc pattern of 50 different State laws 

started to change in the 1980’s when States began to codify their 

trade secret laws by adopting provisions of the Uniform Trade Secrets Act, a model law developed by the National Commission on 

Uniform State Laws. 

The development of an economy driven by technological advances, however, and increasing globalization of businesses and 

supply chains made trade secrets more valuable in interstate and 

international commerce and also more susceptible to misappropriation. Industry in the U.S. started to recognize that some foreign 

governments and firms were competing unfairly with U.S. competitors by stealing their trade secrets. Domestic firms were seeing 

their crown jewels stolen and taken overseas where firms with no 

investment to recoup could make the product and sell it for much 

less than the victimized U.S. firm. Investment and jobs were at 

stake in the United States. 

The remedy for this form of theft, however, remained entirely in 

the hands of State law. In effect, the same tools available in the 

1890’s were the only ones still available in the 1990’s, and so Congress came to consider the issue and ultimately enacted in 1996 the 

Economic Espionage Act. 

During congressional consideration of that act, a number of firms 

requested that the bill include a private Federal civil remedy for 

the misappropriation of a trade secret to complement the criminal 

and civil injunctive remedies the bill gave to the Federal Government. That request, however, was made at the very end of the 

process, after a consensus on the bill had been achieved. 

Although the addition of a private Federal civil remedy was seen 

as valuable, it was thought that the proposal needed to be vetted 

on its own terms and for its own merits. The intent was that Congress could turn to it the following year. The failure to include in 

the EEA, essentially a criminal statute, an ability for victimized 

firms to seek a civil remedy in Federal court was due only to the 

timing and not in any way to the merits of the proposal to include 

Federal civil remedy. For a variety of reasons, primarily that congressional attention on intellectual property was taken up first by 

what became the Digital Millennium Copyright Act and, subsequently, by patent reform, the addition of a civil trade secrets remedy wound up lying dormant for a number of years only to be renewed recently by Members of both Chambers, including Members 

of this Committee. 

Since enactment of the Economic Espionage Act, the problem 

with trade secret theft has grown dramatically. Foreign competitors continue to try to steal their way to success on the back of intellectual property developed here in the United States. The FBI, 

however, has many priorities and limited resources and cannot re-
9 

spond to every reported theft of trade secrets, even by foreign individuals and firms. Just as we rely on both criminal law and civil 

litigation as complementary tools to protect property interests in 

other areas, we should do so in this area as well. 

A Federal civil remedy for trade secret misappropriation would 

provide an important addition to existing protections for trade secrets at the Federal and State levels and could bolster our economy 

and save U.S. jobs at no additional cost. In addition, it would help 

protect and promote U.S. interests around the world. Many countries do not provide adequate legal protection for trade secrets, and 

these weak regimes present significant risks for U.S. firms seeking 

to expand operations globally. Enhancing our own legal protections 

for trade secrets would serve as a model for other countries and 

arm our trade negotiators with a model they could point other 

countries to and encourage them to follow. 

I thank you for your attention and will be pleased to respond to 

any questions. If I might just very briefly be permitted an additional moment to recognize Chairman Coble, who will be retiring 

at the end of this year, and thank him very much for his kindness 

to me during my service on the Committee and acknowledge his 

lifetime of dedicated service to our country, his State, and the people of the Sixth District of North Carolina, and particularly his 

work on IP issues during his career. Thank you. 

[The prepared statement of Mr. Hertling follows:] 
10 
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Mr. COBLE. Mr. Hertling, I thank you for that. I was going to recognize you and welcome you back to the Hill, whether you had 

made that comment or not, but I thank you for that. I think you 

are the only witness, Mr. Hertling, who did have Hill experience, 

so it is good to have you back on the Hill. 

Mr. HERTLING. Thank you. 

Mr. COBLE. Good to have the other three witnesses as well. 

Mr. Simon, you are recognized for 5 minutes. 

TESTIMONY OF DAVID M. SIMON, SENIOR VICE PRESIDENT 

FOR INTELLECTUAL PROPERTY, SALESFORCE.COM INC. 

Mr. SIMON. Thank you, Mr. Chairman. 

Mr. COBLE. Mr. Simon, pull that mike a little closer to you. I’m 

not sure you’re on yet. 

Mr. SIMON. Okay. 

Mr. COBLE. That is better. 

Mr. SIMON. Thank you, Mr. Chairman, Ranking Member Nadler, 

and Members of the Judiciary Committee. I want to thank you for 

the opportunity to discuss the need for a Federal trade secret law 

on behalf of Salesforce.com. 

Trade secrets are vital and important to us. Having been named 

Forbes magazine’s most innovative company for the last 3 years, 

trade secret law is central to protecting our intellectual property. 

Unlike conventional software, almost all our software stays in our 

data centers. Our customers entrust their own and their user status for storage by us so their data can be processed by our servers. 

Yet it is vital and important to us that any legislation take into account some fundamental differences that have arisen as a result of 

Internet business models, such as the ones we use, in contrast to 

old rules based on seizure for physical goods. 

Trade secrets differ from other forms of IP in several respects, 

as many have noted. No government agency needs to examine our 

secrets to obtain protection as opposed to patents or trademarks. 

Unlike copyrights, no registration is required before filing a lawsuit. Protection is immediate. As long as our secret information is 

not accessible to others, has actual or potential value, and is subject to reasonable efforts to keep it secret, the law in the U.S. provides, while disparate, powerful civil and criminal remedies to stop 

others who try to steal our own or our customers secrets. Given the 

simplicity of this protection and these strong sanctions, it is little 

wonder that the National Science Foundation found by a factor of 

two, U.S. managers believe trade secrets are the most important 

form of IP protection available. 

We appreciate the need for both a strong trade secret protection 

and strong remedies. I was involved in one of the earliest Economic 

Espionage Act prosecutions and the ability to seizure the stolen 

trade secrets hidden in the thief’s house was key to the success of 

the prosecution. However, many of the proposals that we have seen 

provide a seizure power to private civil litigants that we view is far 

too strong. They fail to take into account the differences between 

trade secrets and other IP that I just outlined and the difference 

between physical goods and the Internet economy. 

The seizure provisions fail to even take into account that often 

what is involved is third party’s property. If one assumes that one 
22 

of our 100,000 customers has misappropriated someone’s secrets, 

that does not justify having marshals enter our storage networks 

and starting to seize our disk drives. Not only are these drives our 

property, but the way our proprietary workload and security protocols for data storage work, the data for any one customer is highly 

likely to be intermixed with the data of hundreds of other customers on any one disk drive. Any drive that were seized would 

probably also include dozens, if not hundreds of third party secrets. 

Seizure of the drives also is likely to result in business interruption 

for the dozens or hundreds of innocent customers whose data is 

seized. For these reasons alone, we believe that ex parte seizures 

of innocent third parties who host data for others should be prohibited. 

Further, proposed in these overly generous ex parte provisions 

point too often to counterfeit marks and copyrights to justify their 

position regarding seizures from third parties. However, that ignores fundamental differences between trademarks and trade secrets. Marks and copyrights in seizure matters are almost invariably concerning physical things. Trade secrets, by their very nature, ethereal. Unlike trademarks and copyrights, trade secrets do 

not require any form of government approval or registration. Judging on counterfeit marks and copyrights do not require technical 

expertise. Seizure by marshal requires, on the other hand, of trade 

secrets also—excuse me—on trademarks also does not require technical expertise. Seizure of computer information stored on disk 

drives clearly does. 

With few district court judges or marshals trained in the details 

of how computer storage networks work, the right procedures to obtain through secret and unbalanced ex parte hearings needs to be 

carefully cabined. Nor does the emergency application for relief 

from a seizure order provide an adequate remedy. District court 

judges, as this Committee knows, are tremendously overburdened, 

and Federal Rule of Civil Procedure 65 permits a judge to keep a 

seizure order in place for up to 14 days without a hearing. The 

Internet economy often provides the interruption of a customer 

service, can no—can last no longer than a total of 5 minutes in an 

entire year, so current seizure rules permit an interruption that is 

approximately 4,000 times longer than what is often contractually 

mandated for business on the internet. 

In short, trademarks and copyright cases involve physical things 

that are well understood generally by the legal system. Internet 

business models of hosting together all sorts of third party information are little understood and need different models. We look forward to working with the Committee on achieving the right balance for a strong trade secret law that also balances the needs of 

the Internet economy. 

Thank you, and I will be happy to answer any questions you may 

have. 

[The prepared statement of Mr. Simon follows:] 
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Mr. COBLE. Thank you, Mr. Simon. 

Mr. Burns. 

TESTIMONY OF THADDEUS BURNS, SENIOR COUNSEL, 

INTELLECTUAL PROPERTY & TRADE, GENERAL ELECTRIC 

Mr. BURNS. Good afternoon, Chairman Coble, Ranking Members 

Nadler and Conyers, and Members of the Committee, thank you for 

inviting me to testify today on the importance of trade secret protection for job-creating companies in America. My name is Thaddeus Burns, and I am Senior Counsel, Intellectual Property and 

Trade, at General Electric, a company that has been at the forefront of innovation since 1892. I am here today on behalf of the Intellectual Property Owners Association, a trade association representing more than 200 companies and 12,500 individuals in all 

industries and fields of technology. Trade secrets are an increasingly important form of intellectual property for IPO members. We 

invest significant resource to develop proprietary know-how, such 

as manufacturing processes, industrial techniques, formulas, codes, 

and designs. The value of our trade secrets is not lost on competitors here and around the world, and the theft of our intellectual 

property has become a growing problem. 

The threat comes from numerous sources, and the rise of global 

supply chains and perpetual connectivity has made it even easier 

for would-be thieves. And when our trade secrets land in the hands 

of a rival, we are put at a competitive disadvantage. Trade secret 

theft has become more sophisticated, and companies have responded by raising our internal defenses, but the law also needs to 

keep pace. The current legal tools available to remedy trade secret 

theft are unnecessarily inefficient and inconsistent with other 

areas of intellectual property law. 

The Economic Espionage Act is the Federal law that protects 

trade secrets but, as a criminal law, has its limitations. The FBI 

and Department of Justice do an excellent job, but they have limited resources, numerous priorities, and would never be in a position to bring charges in all instances of trade secret theft. 

Most States have adopted civil remedies based on the Uniform 

Trade Secrets Act. These laws work well to remedy local and intrastate trade secret theft, such as the case of an employee who takes 

a customer list to the competitor across town, but State courts are 

not well suited to respond to the nature of trade secret theft today, 

which is increasingly likely to involve the movement of trade secrets across State and even international lines and requires swift 

action by courts to preserve evidence and protect the trade secret 

from being divulged. 

IPO, therefore, supports the creation of a Federal civil remedy for 

trade secret misappropriation which would allow a trade secret 

owner to act more quickly across State lines. Owners of other forms 

of intellectual property, copyright, patents, and trademarks can enforce their rights in Federal court. IPO urges this Committee to 

consider effective and balanced legislation to create a similar remedy for trade secret owners that responds to the increasingly sophisticated nature of trade secret theft today. 

Importantly, a Federal civil remedy will not increase litigation. 

Businesses will never be shy about protecting our property rights 
34 

when our investment in R&D are stolen. We will act to protect our 

trade secrets, whether it means going to State court or Federal 

court, but a Federal remedy will be more efficient and effective. 

A Federal civil remedy is also important to our global competitiveness. The ability of American companies to access foreign markets is affected by the protection those markets provide for intellectual property. The U.S. Trade Representative’s Office prepares a 

Special 301 Report each year identifying trade partners in marketplaces that have inadequate IP protection. IPO submitted comments earlier this year as part of that process which highlights the 

problem of inadequate trade secret protection. 

If the United States leads by example, however, we have an excellent opportunity to raise and harmonize the global framework 

for trade secret protection. Enacting legislation that creates the 

gold standard for trade secret protection will be important as the 

EU considers its trade secrets directive and as the United States 

negotiates multilateral trade agreements and bilateral investment 

treaties. 

In conclusion, IPO supports a Federal civil remedy for trade secret theft because our member companies, creators of innovative 

products and demand around the world, and creators of good wellpaying jobs in the United States, know that our value is in our 

ideas and our creativity. We are increasingly being targeted by sophisticated efforts to steal our proprietary information. A Federal 

civil remedy will provide important tools we need to safeguard our 

valuable know-how and to continue to lead the world in creating 

new and innovative technologies, products, and services. 

Thank you for the opportunity to testify today, and I look forward to your questions. 

[The prepared statement of Mr. Burns follows:] 
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Mr. COBLE. Thank you, Mr. Burns. 

Mr. Moore. 

TESTIMONY OF CHRIS MOORE, SENIOR DIRECTOR, INTERNATIONAL BUSINESS POLICY, NATIONAL ASSOCIATION OF 

MANUFACTURERS 

Mr. MOORE. Chairman Coble, Ranking Member Nadler, and 

Members of the Subcommittee, thank you for your focus on the protection of trade secrets and for the opportunity to testify today. My 

name is Chris Moore, and I am Senior Director for International 

Business Policy at the National Association of Manufacturers. The 

NAM is the largest industrial trade association in the United 

States with more than 12,000 members in all 50 States. 

Mr. Chairman, U.S. global leadership in manufacturing depends 

on the strong protection and enforcement of intellectual property 

rights, including trademarks, copyrights, patents, and trade secrets, both at home and abroad. Today, trade secrets are more important than ever before to manufacturers small and large. Trade 

secrets are acquired and developed at significant cost and through 

many years of company experience and investment. They provide 

a powerful business advantage in highly competitive sectors, like 

manufacturing, but trade secrets are not exclusive rights. Once disclosed, their value is lost forever. Theft has a measurable real 

world impact. It costs good-paying American jobs and can even put 

entire businesses at risk. 

Trade secrets are particularly vital for small- and medium-sized 

businesses that account for the vast majority of NAM members. 

For many of these firms, trade secrets are their intellectual property, but trade secrets increasingly are at risk in today’s more mobile and interconnected global economy. Trade secrets theft is increasingly interstate and international in scope. Manufacturers, 

small and large, are doing everything they can to harden their networks and safeguard their trade secrets. Congress and the Administration also have critical roles to play in ensuring America’s laws 

and policies are equal to today’s threats. 

Specifically, NAM urges the Committee to support legislation 

that would provide access to Federal civil enforcement for trade secret misappropriation. Such access is vital because State courts are 

not always well suited to working quickly across State and national 

boundaries to facilitate discovery, serve defendants or witnesses, or 

prevent a party from leaving the country. The time it takes to 

bring action in multiple State courts gives thieves the advantage 

and prevents trade secret owners from acting promptly to protect 

proprietary information and preserve evidence. The cost of taking 

action across jurisdictions can effectively bar businesses and especially small businesses from using a key tool to defend their rights. 

Mr. Chairman, the fact that trade secret owners don’t have the 

same access to Federal civil enforcement as owners of every other 

intellectual property right leaves them without an essential means 

to deter theft and recover losses. It also makes it harder for the 

United States to lead internationally and to work with our overseas 

trading partners to improve trade secret protection and enforcement around the world. 
45 

Trade secret protection and enforcement is still inadequate in 

many countries and regions, putting industrial know-how and technology at risk. But with access to Federal civil enforcement, along 

with effective criminal protection of trade secrets already provided 

for under the Economic Espionage Act, there are concrete opportunities to strengthen protection and enforcement overseas. Through 

trade agreement negotiations and through ongoing engagement in 

bilateral and multilateral forums, the United States can make common cause with Europe, with Japan, and others around the world 

that are facing similar challenges and beginning to pursue their 

own solutions. 

Chairman Coble, Ranking Member Nadler, and Members of the 

Subcommittee, manufacturers need your help to ensure they can 

effectively and efficiently protect and enforce their trade secrets at 

home and abroad. 

Thank you for the opportunity to testify this afternoon. I look forward to answering any questions you may have. 

[The prepared statement of Mr. Moore follows:] 
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Mr. COBLE. We have a distinguished panel, and I thank you all 

for your contribution and being here. 

Gentlemen, we try to comply with the 5-minute rule as well, so 

if you all can be terse in your response, we would be appreciative. 

Mr. Burns and Mr. Moore, with the recent elections in India 

bringing in a new pro-business, pro-reform prime minister, we are 

hopeful that the IP environment in that country will improve. 

What steps should the new government take to promote greater 

protection for trade secrets, Mr. Burns and Mr. Moore? 

Mr. BURNS. Well, I think you have—this is an excellent question, 

Mr. Chairman, and I think you have pointed out one of the very 

bright spots right now when it comes to the world of intellectual 

IP diplomacy. I think the first step is going to be engaged in dialogue because it has been for many months that there has not been 

an effective dialogue between the government of India and the 

United States on key intellectual property issues. I think we all anticipate that this new administration in India will begin that process again and will allow us to begin to better understand where 

those key differences are and where there are opportunities to 

move forward in a mutually advantageous spirit. 

Mr. COBLE. I thank you, sir. 

Mr. Moore, you want to add to that? 

Mr. MOORE. Thank you, Mr. Chairman. 

I agree with my colleague. As you may be aware, manufacturers 

across many different sectors have faced a number of different 

challenges in the Indian market over the last couple of years, and 

we are very pleased and encouraged by what we are hearing from 

India’s new government, their commitment to a good business environment, to open trade and investment, agree that beginning that 

conversation and having that dialogue will be critical as a first step 

and something that we hope to see early on in the new Indian administration as a way to begin to address some of the challenges 

and look at opportunities to work together constructively on issues 

like trade secrets. 

Mr. COBLE. I thank you, sir. 

Mr. Hertling, what are the limits of relying solely on the criminal 

provisions of the Economic Espionage Act at the Federal level? 

Mr. HERTLING. Well, you can look at the limits in a couple of different ways. First of all, I would reiterate that there is very few, 

in fact, no area of law that I can think of, in which the sole remedy 

is limited to criminal enforcement, particularly for IP, the misappropriation or however—whatever the term of art would be used 

in patents. Of course, it is not misappropriation in that field. Everybody—owners of any form of intellectual property have the ability to enforce their rights through civil litigation as well as, in 

some instances, you can have criminal prosecution, depending on 

the nature of the theft or misappropriation if it violates other 

criminal laws. 

So, it is, in part, a question of equivalence here to provide trade 

secrets the equivalent rights—trade secret owners the equivalent 

rights of the owners of other forms of intellectual property. It is 

also, like now, trade secret owners have a civil remedy. It is at 

State law, and as we are finding, as owners of trade secrets are 

finding, that remedy in the modern world where much of the theft 
54 

is international in nature and doesn’t respect national borders, 

much less State borders, a remedy limited to State law is inefficient and ineffective in many instances. 

So, this is not a question of criminal law versus civil law, per se, 

but it is taking the existing civil remedies and making them more 

effective and more efficient. Looking purely at the criminal law 

context, of course, one of the reasons why in other areas of the law 

we don’t rely solely on criminal law as the enforcement mechanism 

is that law enforcement is busy. The FBI has many priorities, very 

important ones. They can’t respond to every claim to bring their investigative resources to bear. Prosecutors have to make the same 

kind of call as to what kind of cases they are going to file, and 

then, finally, I would say the criminal law is very good at punishing acts that have already occurred. But the goal here, particularly in seeking civil remedies, including seizure remedies, is to 

prevent the information from being used wrongly in the first place 

by the thief or the company on whose behalf the thief is operating. 

So the criminal law is fine. It is post hoc punishment, but you want 

to bar the—you want to close the barn door before the horse gets 

out, and the civil law is a much more effective remedy in that respect. 

Mr. COBLE. Thank you, sir. 

Mr. Simon, let me try to get one more question in before the red 

light turns one. Could you speak more, Mr. Simon, to the unique 

role that trade secrets play in your business and the issue that 

cloud and Internet-based companies face when it comes to trade secret protection, specifically when you are contacted by the authorities regarding misappropriated—appropriated data that is put in 

the, quote, ‘‘cloud,’’ close quote, by a customer? 

Mr. SIMON. Thank you. So, you know, from our perspective, there 

are certain things that are relatively easy to do, such as securing 

data, denying access to data. There are other things that are very 

difficult to do, like giving possession to physical media, as I testified earlier. So, from our perspective, what we are really focused 

on is wanting to make sure that whatever remedy exists, and we 

understand there may need to be a remedy, and we are not opposed to that, that it take the businesses into account and the security of both our data and our customer’s data into account. If I 

may, I just would like to interject one additional somewhat of a 

short comment—— 

Mr. COBLE. Sure. 

Mr. SIMON [continuing]. On criminal procedures in trade secret 

context. So criminal trials, by their very nature, tend to be much 

more open than civil trials, and having been through on behalf of 

a former client, and Economic Espionage Act case, one of the difficulties is, once that case goes to trial, a lot of information is going 

to be available in the public that would not ordinarily be available 

in a civil trade secret case. So, because of the constitutional issues 

that are involved, there are also some shortcomings to criminal 

prosecutions under the EEA. 

Mr. COBLE. I thank you, Mr. Simon. 

My time has expired. 

The gentleman from Michigan, Mr. Conyers. 
55 

Mr. Nadler, you would—who? Okay. Mr. Nadler from New York 

is recognized for his questions. 

Mr. NADLER. Thank you. Everyone’s testimony supports a creation of a Federal civil cause of action. Does anyone know of anyone who opposes that? We know of no opposition to that proposal. 

Mr. HERTLING. Ranking Member Nadler, let me start on behalf 

of Protect Trade Secrets Coalition. We represent a lot of different 

industry sectors, and we have also been undertaking, on behalf of 

the Coalition, outreach to other industry sectors, to public interest 

organizations, trade associations and the like, and we have not yet 

encountered anybody who opposes the concept of a Federal civil 

remedy for the misappropriation of trade secrets. 

Mr. NADLER. So it is all the details. Would creation of a Federal 

civil cause of action lead to increased litigation? Anybody? 

Mr. HERTLING. I will take that again. I don’t believe so. We—I 

think, as Mr. Burns testified, companies are already using civil 

legal proceedings. 

Mr. NADLER. You simply move the litigation from civil to—— 

Mr. HERTLING. I would use the local—— 

Mr. NADLER. From State to Federal, it might eliminate duplicative of the State—— 

Mr. HERTLING. And in fact, Mr. Nadler, it might even reduce, at 

the margins, litigation because you would no longer need to file in 

multiple States to enforce. 

Mr. NADLER. And so, as you say, reduce that. 

Mr. Simon has raised some concerns about seizure provisions, ex 

parte provisions in existing legislative proposals. Does any—do you 

believe that this is an issue that can be resolved in a manner that 

strikes an appropriate balance and satisfies all stakeholder interests, and what would be the key elements of such an agreement 

with respect to ex parte proceedings or seizures? Anyone? Mr. 

Simon? 

Mr. SIMON. Thank you. So, I think it is possible. It—but it requires somewhat different thinking. Like the example I gave of the 

current rules regarding seizure for physical goods, where you have 

14 days before you—up to 14 days before you are going to be in 

front of the judge. When you are having hundreds of millions of 

dollars per hour go by that are being lost because a business is 

down, 14 days is way too long. There are other things that—— 

Mr. NADLER. Fourteen days for what? 

Mr. SIMON. Fourteen days. So under the Federal Rule of Civil 

Procedure 65, you have up to—the Court can say that it will keep 

a TRO in place for up to 14 days. From what—before you get a 

hearing in front of the judge as to whether or not—— 

Mr. NADLER. That’s obviously too long. 

Mr. SIMON. Sorry. So that is an example of a concern. It requires 

thinking on a different timeline, and I understand with an overburdened judiciary, that is difficult. 

It is a question of how do you fashion the remedies, what is the 

right set of remedies, and it is also technically complex because different companies, even different companies in our own industry 

when we have been talking to several about this, have very different approaches to how they handle customer data and what they 
56 

do with the customer data, and as a result, that has to be taken 

into account 

Mr. NADLER. So as we seek to develop legislation, if we were 

going to do so on a Federal cause of action, the controversies, if 

any, are going to be on what limitations and so forth we put on seizures? 

Mr. SIMON. I think that will probably be one area. There may be 

some others, but to our company, that is probably the most serious. 

Mr. NADLER. Does anyone else want to answer this? 

Yes, Mr. Burns. 

Mr. BURNS. Yeah, I can certainly elaborate on that, and I am 

very much in agreement with you. I think when we started having 

this discussion, all of us were thinking with a Lanham Act headset 

on, and we know the Lanham Act is really aimed at essentially 

seizing goods, so you are trying to find the infringing embodiment 

of a Lacoste shirt, right? 

Mr. NADLER. A what? 

Mr. BURNS. This is a—a Lacoste shirt, you know, this is a very 

different environment that we are in. What we are really—our objectives here are really about preserving evidence so that you can 

have a proceeding on the merits that looks at all the facts and also 

to prevent further leakage beyond what has already taken place, 

whether it is in a digital environment or a physical environment. 

So I fully agree with you, if there is going to be a seizure provision, it needs to be a very narrowly tailored one, something of last 

resort that is aimed at that bad faith individual who is about to 

get on a plane, fly to another country with a PIN drive full of confidential data. 

Mr. NADLER. Thank you. Mr. Burns, China is often identified as 

a problem with regard to theft of U.S. trade secrets. In fact, I saw 

something I think I read recently that I saw that there was a national holiday in China a few weeks ago and that hacking of American companies went down 40 percent that day. People were entitled to their day off, I suppose. Now, I assume the problems are 

not limited to China. How has the lack of protection impacted U.S. 

companies seeking to expand operations globally, and what do you 

think can be done to encourage other countries to provide more robust protection? 

Mr. BURNS. Well, I think you are absolutely correct. This is a 

global problem that we experience in all the jurisdictions in which 

we are doing business, and the challenge is to take the kinds of 

steps that are in our power today to try to improve the situation. 

And my sense is that when the United States Government is 

dealing with foreign trading entities, whether it is China or India 

or the European Union, if we come to a discussion from a position 

of strength and can say with a clear conscience that we have done 

our very best, that we have a strong Federal civil cause of action 

in place within our own jurisdiction, we are much more likely to 

be taken seriously by interlocutors from other governments. 

Mr. NADLER. Does anyone else want to answer that? 

If not, my time is expired, and I yield back. Thank you. 

Mr. COBLE. I thank the gentleman. 

The distinguished gentleman from North Carolina. 

Mr. HOLDING. Thank you, Mr. Chairman. 
57 

Is anyone able to quantify the amount of litigation currently 

going on in State court regarding trade secrets? 

That might be a little bit difficult, but the—I am sure our friends 

in the Federal courts would want to know what type of a wave of 

litigation is headed to Federal court if we give a Federal cause of 

action. 

Mr. SIMON. So, in California, obviously, particularly in Silicon 

Valley, many key trade secret cases have been brought over the 

years, but it is a relatively small percentage of cases in a year, at 

least from what I have heard. I would say it is in the order of 10’s 

to maybe 100 per year in, you know, in the Bay area, is you know, 

probably the number I heard in talking to judges. Actual reliable 

statistics, I am not sure. 

Mr. HOLDING. And the creation of a Federal cause of action 

would not preclude the States from continuing to have State law 

causes of action for trade secrets, would they? Mr. Burns? 

Mr. BURNS. That is exactly right. 

Mr. HOLDING. And of course, how would removal work? I mean, 

just to get into the—I mean, I don’t know if anyone has thought 

through this, but as I sit here and since we have complete agreement that there needs to be a Federal cause of action, I started to 

think about some of the more nuances of it, so having spent my 

legal career prior to sitting in Federal court, you know, sometimes, 

you know, certain parties want their action to be in Federal court. 

Defendants, you know, in a plaintiff’s action, often want to try 

to get removal into Federal court, so how would you see that playing out? Would you see plaintiffs going into State courts? Are there 

any particularly favorable State courts that we would be seeing 

plaintiffs going to and then removal actions, trying to get those removed to Federal court? Has anyone thought that through? 

Mr. Simon. 

Mr. SIMON. It has been a long time since I removed a case to 

Federal court, but I think the one way it may play out is plaintiffs, 

in seeking to avoid having to deal with the delay of a removal petition, may just go straight to Federal court first, and that is from 

a timing standpoint since you are generally as a plaintiff seeking 

emergency relief, you do not want to file in State court and then 

have you know, start to get your emergency relief and then have 

somebody remove it to Federal court. 

Mr. HOLDING. All right. 

Mr. BURNS. If I could just—— 

Mr. HOLDING. Mr. Burns. 

Mr. BURNS [continuing]. Add one point. I also think if there is 

Federal court jurisdiction in this case, we would tend to see much 

more local cases being the subject of State court litigation. So, 

purely intrastate type cases, and in those cases, there is very little—there is probably very little incentive to remove to Federal 

court because both parties are locally situated and are comfortable 

probably with dealing with a local State court. 

Mr. HOLDING. All right. Well, you know, the variances between 

discovery, you know, local rules, you have got your State rules and 

then your Federal rules, and then you have got your local rules of 

these particular district court, it could get interesting. 
58 

The—you know, we have spoken a lot about the challenges that 

our U.S. companies are facing abroad, so, if anyone wants to talk 

about extra-territoriality, and you know, how the statute could be 

composed in such a way to try to protect our companies doing business abroad, you know, and take it through where maybe the instance of the infringer, you know, the violator you know, has no assets here in the United States that we could get to or that question. 

Mr. Simon, you want to take a hack at that or Mr. Hertling? 

Mr. SIMON. Well, I think there probably is a balance that can be 

struck there. I certainly don’t think we want to go where at one 

point U.S. antitrust enforcement seem to have gone to which was 

the extreme being U.S. courts trying to tell Swiss watchmakers 

what they can do in Switzerland doesn’t work too well. There are 

analogues in the antitrust area that may be worth taking a look 

at. There is a difficulty, though, if you have somebody who is a bad 

actor and is completely outside the jurisdiction of the U.S. courts, 

has no assets that are subject to U.S. courts, that can become very 

difficult if you have to go to a country that may be hostile to the 

remedy that you are seeking. 

Mr. HOLDING. Mr. Hertling, you want to chime in there. 

Mr. HERTLING. Yeah, the other point I would make is I think one 

of the important values, as a number of us have alluded to, of having a Federal civil cause of action is that it would provide a model 

for other countries, and I think ultimately the most effective relief 

for the problem you have identified, is to get other countries to improve the quality of their legal systems and the protections that 

they can provide in their own courts. 

And I think if we can achieve that through the intercession of 

our trade negotiators and if our trade negotiators have an effective 

national level remedy in the United States, it will make them more 

effective at achieving sound national level remedial systems globally. 

Mr. HOLDING. Good. 

Mr. Chairman, I yield back. 

Mr. MARINO [presiding]. Thank you. 

Mr. Conyers. 

Mr. CONYERS. Thank you very much. 

This has been very important, gentlemen. We thank you for your 

testimony. Is, Mr. Simon, the seizure issue one of the things that 

when we start putting together a bill, and some of us are going to 

do that, that we have to be careful of, since there has been so much 

increasingly new and modern technology coming into the digital 

era? 

Mr. SIMON. Yes. You know, there are a couple of things, and it 

is you know, I have to admit, you know, because some people have 

asked me for suggestions, and I am struggling with them right 

now, quite frankly. Part of it is because you have to deal with 

many different ways that people do things. Part of it is you also 

have to try to have as much vision as you can as to what is going 

to happen 3, 4, 5, 10 years out, and that is not easy, particularly 

with the speed with which technology is moving. 

But, you know, from our perspective, the one thing we don’t want 

to end up having, is to have legislation and 3, 4, 5 years out, it is 
59 

we are looking at what we would like to do from a business purpose and we are looking at what the law requires, and there is an 

inconsistency there that prevents us from changing the way we 

want to do business. 

So, you know, we hope that whatever remedies can be fashioned 

can be very flexible because that is what we think we need. 

Mr. CONYERS. Do I get out of your response that we might make 

things worse if we don’t carefully create a Federal civil law on this 

subject? 

Mr. SIMON. I am not sure you would necessarily make things 

worse. I think what might happen, though, is that there might be 

individual business models that otherwise might make a lot of 

sense, but because of, for example, some remedy that Congress has 

mandated, is required, the technology just won’t work for that purpose. 

So, I want to be very careful with what I would say because I 

think overall getting a Federal legislation would be very helpful, 

but I also want to say that, you know, we have to try to do the 

best job we can on the remedies. 

Mr. CONYERS. Uh-huh. Thank you. 

Mr. Moore, small businesses, I think, are very up against it. In 

the first instance, under the present circumstances, it is just my 

suspicion that most of them can’t even afford to deal very seriously 

at this stage with this whole question of secrecy. Now, is there— 

will we be able to help them when we finally come together on a 

secrecy law between both ourselves and the Senate? And I understand the Senate has—at least has a bill, and we are going to be 

working on one. 

Mr. MOORE. Thank you very much. 

Small businesses really don’t have a choice about addressing this 

challenge. It is there. They need to address that it is something 

that affects them as well as large companies. I do think that you 

see the challenge of trade secrets theft affecting smaller businesses 

more acutely. Certainly for many of those businesses, trade secrets 

make up a larger share of their intellectual property portfolio than 

you might find in some larger businesses that might rely more 

heavily on patents, for example. 

You see that small business owners are busy running their businesses and less focused on the threats and some of the challenges 

that are out there, and of course, for small businesses, the cost of 

protecting and enforcing their rights may be higher relative to 

their total revenue than you might find in a larger firm. 

Certainly we think that having a Federal civil cause of action for 

trade secrets theft would be very important to enable them to effectively secure and enforce their rights domestically. 

Thank you. 

Mr. CONYERS. Uh-huh. Mr. Hertling, it is good to see you again, 

have you back in your old digs once more. 

It seemed like to me that it took us quite awhile to get around 

to trade secrets, and yet, now that we are around to it, everybody 

says it is very important that we deal with it. I am amazed that 

it hadn’t come up before as a matter of importance. 

Mr. HERTLING. Well, I think it did. I mean, it was brought up 

in the context of the 1996 Economic Espionage Act, and it was just 
60 

brought up relatively late in the process, and so I think that the 

notion was, at the time, let’s do the criminal statute first and then 

we will get around to it, but then all of a sudden the issue surrounding—that prompted the ultimate enactment of the Digital 

Millennium Copyright Act took over, and then, from there, the 

Committee’s IP focus turned to patent reform. 

So, the issue has been lingering out there, but now we think the 

time is ripe. We know obviously the Committee is conducting its 

broad copyright review and those are important issues, and of 

course, the patent issue, the House passed the patent litigation reform bill last year, and those issues are still out there, but we 

think that these issues are now ripe for legislation. 

And we think, unlike perhaps some of those other issues, as we 

have heard, while there needs to be great care taken with striking 

the appropriate balance, this is an area in which there do not appear to be any significant disputes that should derail the adoption 

of legislation. 

Mr. CONYERS. And I am excited about getting this moving, and 

I really appreciate the bipartisan tone of the discussion that we are 

entering in around here. That is important as well. 

And I thank Chairman Coble and yield back the balance of my 

time 

Mr. COBLE [presiding]. I thank the gentleman. 

The distinguished gentleman from California, Mr. Issa is recognized for 5 minutes. 

Mr. ISSA. Thank you, Mr. Chairman. 

Fourteen years ago when I came here, they called me distinguished, too, but I was younger, and Richard, it is good to see you 

back. 

You know, there are two things that worry me around here. One 

of them is when a major piece of legislation or initiative is immediately bipartisan, I wonder, well, who is protecting the other side 

and secondly, whenever we are talking about expanding intellectual property, I think back to a time before I got here when the 

powers that be decided to retroactively expand patent rights so 

that some people whose patents were about to expire got extra 

time, and it was envisioned in the bill, for God only knows what 

reason, and then, of course, in copyright, we retroactively made ‘‘I 

Got You Babe’’ last longer along with black and white Mickey 

Mouse. No comment other than it just happened to be a symbol. 

And so as I look at federalizing, if you will, the civil cause of action, I have a couple of questions—more than a couple of questions 

and because I am one of the non-lawyers here on the Committee, 

I will put my spectacles on so I will look more lawyerly and I will 

read just quickly. ‘‘To promote the progress of science and useful 

arts by securing for a limited time to authors and inventors the exclusive right to the respective writings and discoveries.’’ 

A trade secret is in fact a discovery; would you-all agree? It is 

what you know that somebody else doesn’t know, Mr. Burns, right? 

Just yes or no. 

Mr. BURNS. I think it—I think in some instances, absolutely. In 

other instances, it could be something distinct, yeah, but it is not 

a discovery in the sense that a discovery of—in the technical—— 

Mr. ISSA. It is what you know that someone else doesn’t know. 
61 

Mr. BURNS. Absolutely. Yes, sir. 

Mr. ISSA. So you know something somebody else doesn’t know, 

and the basic concept of trade secret is, as long as you can keep 

it a secret, you can keep it in perpetuity and monetize the benefit; 

is that right? I just want to make sure we define the term here. 

So—— 

Mr. BURNS. If I could respond—— 

Mr. ISSA. Well, these are yes or nos, please. The Chairman is 

very indulgent, but I have only got a couple of minutes. 

Mr. BURNS. Okay. Please. 

Mr. ISSA. Yes, these are in fact that. So, the questions as we federalize the civil action are, do I give you the future revenue stream 

you have lost in perpetuity, do I give you what you would have gotten had you disclosed it under patent rules and gotten anywhere 

from 19 to 12 years, depending on—or 10 years depending upon the 

time it takes before it is granted, do I give you the copyright equivalent. 

So, as we federalize, the first question is, the loss is a monetized 

loss, and that is what you are here seeking. How do I fairly make 

sure that what you deprived everyone from knowing because you 

knew and they didn’t know, and you did not enter it into commerce 

for mutual benefit only for your own benefit—how do I fairly assess 

since there is no constitutional mandate? 

Trade secrets don’t exist under the constitution. The right doesn’t 

exist. This is a statutory giving to people who keep something a secret and have a loss as a result of that entity, that secret being stolen from them. I understand the criminal part. That is settled. How 

do I come up with the monetary one? 

Richard, I would start with you. Put a dollar figure on it, and 

it has got to be probably more than you made here as a staffer. 

Mr. HERTLING. Probably more than that. 

Mr. ISSA. And no litigation. 

Mr. HERTLING. More than I make in the private sector. I think 

those are very—that is a very good question, Chairman Issa. I 

know you are not Chairman of this Committee, but I will still 

use—— 

Mr. ISSA. I am a patient man. 

Mr. HERTLING. But I think the—and I am not an expert on this, 

and I said earlier to Mr. Simon, benefit of sitting next to a real 

lawyer, but I think the question you have raised is one that courts 

today have to struggle with because, again, these sorts of remedial 

actions are being brought every day in the State Courts around the 

country. 

Mr. ISSA. Right. 

Mr. HERTLING. And so—— 

Mr. ISSA. And so I guess my question is, before we—as we proceed to looking at a national and hopefully a global policy, is it, in 

your opinion, critical that we look at what is being done throughout 

the various States and perhaps foreign countries and we figure out 

where we are comfortable monetizing the loss of a secret, in other 

words, the formula for it so that we can issue the kind of guidance 

to the courts in the way of damages, because I can certainly envision that the future revenue of Coca-Cola lost, if that secret formula is disclosed, can bankrupt almost anybody. 
62 

And if I am the recipient of it, maybe harmlessly from the thief 

but in fact the recipient, I can see my entire wealth run out. 

So, my question to all of you is, shouldn’t we embark on an analysis, not of do we do it, because harmonizing that which is disparate throughout the States is appropriate for us to consider, but 

in harmonizing, isn’t our most important task to figure out how it 

is going to be valued, including calculation of length, value, and the 

societal balance between your rights, if you will, for your secret and 

the lack of benefit as a result of it not being ever made public otherwise? 

And Mr. Chairman, if you would let them answer, I would appreciate it. 

Mr. COBLE. Without objection 

Mr. SIMON. Thank you. 

If I may, Mr. Chairman, if you look at the case law under the 

Uniform Trade Secret Act, at least the one that comes to mind, 

there are a couple of things that I think address your concern 

about a perpetual remedy, if you will. 

First of all, injunctive relief is generally—misappropriation of 

trade secrets is generally given only for the reverse engineering period, whatever that would be deemed to be. Normally, I rarely seen 

it be longer than a few years. I am not saying there isn’t a case 

that goes longer than that, but it is rarely longer than that a few 

years. 

When you go to the monetary relief, which is actually the way 

these cases play out, much rarer, because normally the injunction 

ends the case, when typically the grant—it is like trademark law, 

99 percent of the cases settle after preliminary injunction is granted or denied. 

Mr. ISSA. I have been before the ITC. I know these things. 

Mr. SIMON. Yeah. So the way it works from the damages standpoint, the question is, what are you going to be able to convince the 

trier of fact, be it judge or jury, you are entitled to either for a reasonable royalty, which is available sometimes, for lost profits or for 

unjust enrichment. I am not aware of—I mean, there have been 

some very stiff trade secret awards recently. I think DuPont got 

one close to a billion dollars not too long ago for some pretty heinous acts, as I understand it. 

Mr. ISSA. Outside of here, that is real money. 

Mr. SIMON. Yeah. But you know, that is a very exceptional case 

and involved very egregious acts with, if I recall correctly, actors 

from outside the United States. 

Mr. ISSA. Thank you, Mr. Chairman. I appreciate your indulgence, and I appreciate our—this direction toward harmonizing 

these trade secrets. 

Mr. COBLE. You are indeed welcome. 

I believe the distinguished lady from California is next in line, 

Ms. Lofgren. 

Ms. Washington, were you here earlier? 

Okay. I stand corrected. The gentlelady from Washington is—— 

Ms. DELBENE. Thank you. 

Thank you, Mr. Chair, and thank you-all for being here today. 

I think everyone has been advocating for creating a new Federal 

civil cause of action for trade secret misappropriation, and I appre-
63 

ciate the interstate nature of this issue and believe that there is 

merit to having a Federal cause of action. I think it is important 

that we also don’t take away any rights from States in this process, 

too, as we put together legislation. 

One of the things that I believe Mr. Holding touched on earlier 

was the amount of litigation, and I think Mr. Goodlatte also mentioned potential frivolous litigation, and so maybe, Mr. Hertling, I 

was wondering, you know, what do you think about the issue of increased litigation or frivolous litigation if we had a Federal cause 

of action, and do you believe that we would see increased litigation 

as a result? 

Mr. HERTLING. Thank you very much, Ms. DelBene. 

I don’t think that you would see an increase in litigation or an 

increase specifically in frivolous litigation. Of course, frivolous litigation is always in the eye of the beholder. To the defendant, it is 

always frivolous, right, but I think here the net result of the creation of a Federal civil remedy would be in appropriate cases, particularly those would have to be at least of an interstate nature, 

but of an interstate or international nature, you would shift the 

locus of the litigation from State courts to Federal courts. 

The cases are going to be filed anyway. Today, they are being 

filed in State courts or they are being filed in Federal court under 

diversity jurisdiction. I don’t think you would see a dramatic 

change in the number of cases or in the quality of cases being 

brought as a result of the creation of a carefully crafted, well balanced Federal statute. 

Ms. DELBENE. Mr. Burns, I think you mentioned that our trade 

negotiators would be in a better position to use a Federal civil 

cause of action to show the U.S. is setting a high standard when 

it comes to trade secret litigation or trade secret protection. Can 

you talk a bit more about how you think our leadership on this 

issue would be helpful when it comes to negotiations of trade 

agreements? 

Mr. BURNS. Absolutely. I think there are a number of ongoing negotiations right now, and then also some things we call ‘‘bilateral 

dialogues’’ that take place with important trading partners. 

So, in the context of the Trans-Pacific Partnership, having such 

a statute on the books in the United States, I believe, puts us in 

a much stronger position to be advocating a robust trade secret, if 

not chapter, paragraph within an IP chapter, within a TPP negotiation. I also think that, particularly with respect to the bilateral 

negotiations that are between the United States and the European 

Union on what is called the TTIP treaty, this is a very good timing 

to have this legislation come forward. 

As we all know, the European Union has already began the legislative process of a directive that would harmonize trade secret protection within the EU, so the Commission, in November of last 

year, introduced its proposal. That proposal was adopted by the 

counsel of the European Union, and then will be forwarded to the 

new parliament some time in the next couple of months with the 

likely adoption by the early next year. 

The idea of having trade secret language in the TTIP agreement 

is to in a sense codify an understood best practice, an understood 

Transatlantic best practice, and bringing the United States into the 
64 

realm of best practice when it comes to protecting trade secrets is 

a very important part of delivering that entire package. 

Ms. DELBENE. So I would say we need to figure out what we 

would be doing in legislation before that would happen. 

Mr. BURNS. I would say ideally sooner rather than later. It is always better to come to a negotiation from a position of strength 

with legislation that is not—that cannot be easily criticized by a 

trading partner with whom we are trying to enter into a treaty. We 

would be likely to get other consideration in exchange for that, as 

part of that negotiation. 

Ms. DELBENE. Thank you. 

I yield back, Mr. Chair. 

Mr. COBLE. I thank the gentlelady. 

The gentleman from Florida, Mr. DeSantis. 

Mr. DESANTIS. Thank you, Mr. Chairman. Thank you to the witnesses. 

Just as I am reading through some of the—I know the Administration put out a report last year about trade secret theft. I mean, 

is it safe to say that China, in terms of international theft, is overwhelming the biggest culprit? 

Mr. SIMON. I don’t feel qualified to comment on that. I have no 

basis for it. I can read the same reports that you do. You know, 

it—but I do want to point out China is not alone. 

Mr. DESANTIS. No, and there is not, but it seems like there were 

a lot of people who were either investigated or prosecuted for passing information to Chinese universities and companies, and I know 

India appeared a number of times. 

So, when you are in a situation where you have trade secrets stolen from a U.S. company, somebody maybe who is working there, 

they pass it along to a company overseas, you know, yeah, we prosecute the individual who did it, but what are the potential remedies for the company once the information has actually been 

passed, and what do you suggest that Congress do to make that 

more effective? 

Sure. 

Mr. BURNS. Let me comment on that. 

I agree with you. I think that it is really important to recognize 

this as the global issue that it is. 

And by the way, it is also important to recognize that China has 

a Federal trade secret law that has national application that can 

be used in China, and we have used it quite, with some success in 

China. 

So, countries around the world are in the process of examining 

their own sort of trade secret conscience, as it were, and making 

sure that that they have a system in place that makes it likely that 

people who have their trade secret stolen from them get a serious 

opportunity to get to justice. 

So, from our perspective, in order to globalize that best practice, 

again, the most constructive thing that this Committee can do is 

to go back and look at our own system and take the action that 

I think, in pretty much unanimity, U.S. industry is asking for, and 

that is, a Federal civil cause of action that will improve our legislative situation in the U.S. and also just bolster our prestige when 
65 

it comes to negotiating better trade secret protection in other countries around the world. 

Mr. DESANTIS. Can you describe this move in some countries to 

compulsory licensing and how that affects the ability of American 

businesses to operate overseas? 

You want to take that? 

Mr. BURNS. Compulsory licensing is a measure that is understood under international law, that allows for governments to engage in the transfer of intellectual property rights to another party. 

It is something that exists in international law. It is provided for 

in the TRIPs agreement, so that is the reality of international law. 

It is not—I think countries that engage in it on a regular basis, 

it is not like putting the welcome mat out for foreign investment. 

It is like saying to people, ‘‘come invest in our country, oh, and by 

the way, your property rights are at risk,’’ but it is something that 

is legally cognizable under the international treaties that are in 

place today. 

Mr. DESANTIS. Very well. Well, I appreciate it. 

And I yield back the balance of my time. 

Mr. COBLE. I thank the gentleman. 

The distinguished lady from California is recognized. 

Ms. LOFGREN. Thank you, Mr. Chairman. 

This has been very helpful, and I am wondering, I think I saw 

Mr. Simon on the flight out, so I especially appreciate that he came 

all the way from the Bay area to be here today. 

And here is a question I have for you or anybody else on the 

panel. You can’t quantify it, but I do think that there is sort of a 

growing trend, maybe is not quite the right word, in the valley 

where people are shying away from the patent system. 

A lot of engineers feel that it is—that the patent system is actually a drag an innovation, and also it takes so long to get anything 

patented, and I think, this may not be true, but not every trade 

secret is patentable but probably everything that is patentable 

could be a trade secret, and so that leads me to wonder about, as 

you know, I have a kind of a very skimpy bill on it, a civil action. 

I think it needs a lot more work, but it was a marker at least. 

Whether we might be getting into a situation, I don’t want to create another patent troll situation. I don’t want to create another 

situation where unenforceable noncompete agreements are gone 

around through another cause of action that we have created. Do 

you have thoughts or guidance on those two issues, Mr. Simon? 

Mr. SIMON. Sure. Thank you. You know, obviously, as you know, 

there is a lot of concern, particularly in the software industry about 

patents. 

A couple of things to point out that are different fundamentally 

from trade secrets, to patents. One is that you with a trade secret, 

unlike a patent, you don’t start out with the premise that it has 

to take clear and convincing evidence to disprove that the invention 

is patentable. It is the other way around. The owner of the right 

has to prove by a preponderance of the evidence generally that you 

in fact have the trade secret, not always the easiest thing in the 

world to do. 

The second thing is that there are things that are patentable 

that make very little sense to patent. There are things that are 
66 

patentable that make very little sense to keep as a trade secret. 

Just by way of example, my understanding, the pharmaceutical industry, because of the disclosure requirements of the FDA—— 

Ms. LOFGREN. Right. 

Mr. SIMON. Almost all—— 

Ms. LOFGREN. Yes. 

Mr. SIMON [continuing]. Formulations—— 

Ms. LOFGREN. I am thinking more in the IT areas. 

Mr. SIMON. Yeah. In the IT area, it plays back and forth. There 

is a lot of stuff we deliberately do not want to patent because we 

do not want to tell our competitors how to do it and there is no 

way to figure it out from our products. In other areas, it may make 

much less sense to take that approach. 

The other thing I just want to go back to a point Mr. Conyers 

raised earlier if I may, very briefly, is that one of the nice things 

about trade secrets is the protection is much cheaper to acquire—— 

Ms. LOFGREN. Right. 

Mr. SIMON [continuing]. Than a patent, so it is much more readily usable by a small business, and from that standpoint, yeah, I 

think it is actually a pro-small business perspective, too. 

Ms. LOFGREN. I want to—I don’t know if anybody else has comments on this point. I don’t see anybody leaping forward. I am interested in your comment about China’s cause of action and the capacity to gain relief in China. I think that the theft of intellectual 

property, and most especially trade secrets, is severe in the valley, 

and China is a major offender, and in many cases, it is quite obvious it is not just an individual person going back to China. It is 

the Chinese Government that is actually sponsoring this activity. 

Have you seen success in Chinese courts when it is the Chinese 

Government that is actually behind the theft? 

Mr. BURNS. I am not aware of any cases of that nature. 

Ms. LOFGREN. Okay. I am. 

Mr. Moore, do you have any advice on that? 

Mr. MOORE. I am not aware of any cases brought in China 

against the Chinese Government. 

Ms. LOFGREN. Right. 

Mr. MOORE. But certainly our members report a number of different challenges with protecting their trade secrets in the Chinese 

market, not least because of how their confidential business information may be treated, both as it is coming into the country but 

also during a court proceeding. 

Ms. LOFGREN. Okay. Well, it is also that there is a lot of theft 

going on in the valley itself where information is vacuumed out. 

I just think that this is an excellent panel. I see that it is just 

the, what we call the ‘‘nerd caucus’’ left here listening, but I certainly appreciate the information. I look forward to further work on 

it. 

And yield back, Mr. Chairman. 

Mr. COBLE. I thank the gentlelady. 

The distinguished gentleman from Georgia is recognized. 

Mr. COLLINS. Thank you, Mr. Chairman. 

Again, it is like I said, these are the ones where you sort of separate those or are willing to sit and listen, and I was listening when 

I was in over at another meeting to your opening statements and 
67 

others, and I think this is something that it may not make the 

front pages the, you know, I will say ‘‘sexiest headlines’’ and all, 

but it matters to real Americans, it matters to real jobs, and I 

think that is an impact that we can’t ignore. 

Mr. Hertling, do you have a sense of the loss to the U.S. economic—to U.S. economy caused by this trade secret theft? 

Mr. HERTLING. There are a couple of recent estimates that are 

relatively consistent. Last year, as it has been noted I think in Mr. 

Moore’s testimony, written testimony, General Alexander, the 

former head of the National Security Agency, estimated the cost at 

approximately 250 billion with a ‘‘B’’ dollars per year. 

And then earlier this year, an organization called ‘‘The Center for 

Responsible Enterprise and Trade’’ joined with PWC to publish a 

report called ‘‘Economic Impact of Trade Secret Theft,’’ in February 

2014 in which they estimated somewhere between 1 and 3 percent 

of GDP is the value of the theft of trade secrets, which puts it at 

what I would guess to be about $160 to $480 billion per year. 

Mr. COLLINS. So even Washington, D.C., we are talking real 

numbers. I mean, this would are Bs that we could lead to Ts in 

trillions and numbers that most of us when we were in—at least 

my age in, you know, kindergarten and others, you know, trillion 

was a number we didn’t even talk about. I mean, billions were 

those numbers. 

So this is real economic hurt to our economy that we have to—— 

Mr. HERTLING. There are a lot of zeroes on the back of those 

numbers, and behind each of these zeroes is U.S. investment foregone and U.S. jobs lost. 

Mr. COLLINS. Yes. I can see that. Mr. Burns, were you going to 

say something about that? 

Mr. BURNS. Otherwise stated, I believe the CREATE report assesses this as somewhere between 1 to 3 percent of GDP. 

Mr. COLLINS. In fact, Mr. Chairman, I ask unanimous consent to 

enter the Economic Impact of Trade Secret Theft study which was 

just referenced into the record. 

Mr. COBLE. Without objection. 

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Mr. COLLINS. Mr. Burns, could you elaborate further on why both 

a strong patent system and a Federal civil right of—private right 

of action are important for the continued dominance basically of 

the U.S. IP industry? 

Mr. BURNS. Absolutely. You know, patents and trade secrets are 

complimentary forms of intellectual property, and there is this constant interplay within enterprises, within members of IPO asking 

the question, is this something that is better classified as a trade 

secret or as a patent. 

They deliver tremendous value for our enterprises in just a 

countless number of ways. You know, obviously patents, although 

they have limited duration, are exclusive rights, and that means 

that they have a certain kind of value that is different from trade 

secrets. 

Trade secrets are oftentimes the manufacturing techniques, the 

what we call the special sauce—— 

Mr. COLLINS. Okay. 

Mr. BURNS [continuing]. That is linked to the patented right. 

Used together, they are a very powerful tool for generating revenue 

flows, for allowing our business leaders to make intelligent capital 

allocation decisions about where to invest within our companies, 

and they create certainty that we are going to be able to reap some 

kind of benefit from that R&D investment that in and of itself is 

so risky. 

But if it actually leads to patented subject matter and a panoply 

of trade secrets that accompany it, it is much more likely that that 

is going to be a successful technology business enterprise, so—— 

Mr. COLLINS. And I think that is true, and I think one of the 

things that I wanted to add to it, I think one of our discussions 

that we enter into is we take the property right ownership, we take 

thus in what I call ‘‘esoteric terms.’’ We talk about intellectual 

property, patentable items, trade secrets, and really the bottom line 

is whether you are talking across the board from manufacturing to 

music to wherever. 

We have taken it away from actually there is an ownership interest in here, and I think that is something that we lose and we’ve 

got to get back to talking about it being the building block of folks’ 

dreams, ideas that are actually tangible as—just as tangible as this 

phone sitting on this desk, and if we don’t do that, then both 

Democrats, Republicans, all of us are going to be hurting because 

people are going to tune out to what we are talking about. 

Very quickly, a lot of different groups support this Federal right 

of—civil right of private action, but at the same point had two very 

different approaches to patent reform. Very quickly, anyone that 

wants to—to Mr. Moore or anyone, is there—why is there a consensus over trade secret legislation more so than IP or the intellectual property or patentable items? 

Mr. MOORE. Thank you, Congressman. We are one of the organizations that did not take a position on the patent reform bill, in 

part, because we had members on very different sides of that issue. 

We have a very broad membership, lots of different business 

models and approaches, but I am here, and I am here because our 

members agree on this issue. They all have trade secrets, they all 

are seeing a rising threat both at home and abroad, and they all 
105 

want to make sure that those trade secrets are effectively protected. 

Mr. COLLINS. Well, I appreciate that, and Mr. Chairman, I know 

I am out of time, but I think it goes back to this issue that as my 

friend from California put it, the ‘‘nerd caucus’’ is here, and we appreciate this because in the end, a lot of those nerds have great 

ideas and dreams and hopes that we want to protect for future generations, and I think this is a great part of this hearing for that. 

And Mr. Chairman, with that, I yield back. 

Mr. COBLE. I think, folks, in all candor, truth in advertising, I 

am not sure I am qualified to be a member of the ‘‘nerd caucus’’ 

but—— 

Mr. COLLINS. All Ernest Tubb fans can be classified as in a ‘‘nerd 

caucus.’’ You and I—bluegrass will get us there, Mr. Chairman. 

Mr. COBLE. I thank you for that. 

The distinguished gentleman from New York, Mr. Jeffries is recognized 

Mr. JEFFRIES. Thank you, Mr. Chairman. 

Mr. Burns, there was reference made to General Alexander’s observation as it relates to the nature of and scope of the problem 

that we confront in this area, and I just wanted to get some clarification. I gather it was in a 2012 speech he stated that IP theft 

due to cyber espionage is the greatest transfer of wealth and history, estimating that U.S. companies lose 250 billion per year due 

to IP theft. 

Are you aware as to whether he was speaking specifically about trade secret theft or is that $250 billion number all encompassing 

and inclusive of patent infringement, copyright infringement, counterfeit and/or piracy, as well as trade secret theft? 

Mr. BURNS. It is my belief, sir, that he is referring specifically 

to trade secret theft. 

Mr. JEFFRIES. Okay. And that would be consistent with other 

studies that have been done in this area in terms of that particular 

amount? 

Mr. BURNS. Absolutely. Those numbers fall within the range that was put forward in the CREATE study of between 180- and $400 

billion in losses, yes. 

Mr. JEFFRIES. And I think everyone has testified either explicitly 

or implied in their remarks that there has sort of been a recent explosion of trade theft activity and it is become more sophisticated 

over time. What accounts for that phenomenon? And if anyone else 

on the panel wants to weigh in, that would be fine as well. 

Mr. MOORE. Well, just to share with you some of the things that 

we hear from our member companies. I think part of the issue is 

the greater mobility of our workforce. 

One of our member companies, a small business from Maryland, 

testified in the other chamber last month and said, ‘‘look, you 

know, I have six international airports within 100 miles of my facility in Baltimore, and you know, by the time I realized what has 

happened and take action in my home state and in the other States 

where these other airports, the five other airports are located, 

these can be long gone and so the mobility of our workforce, the 

ability of people to get on a plane and be out of the country quickly, 

I think, is big challenge.’’ 
106 

Second, we certainly face a technological challenge. As I pointed 

out in my prepared testimony, what might have taken a moving 

truck to move out of a company in terms of documents, records, different types of information kept secret, can now go out the door on 

a thumb drive, can stick it in the back of your pocket, nobody 

knows you have it, and that is, I think, enabling some of the challenges as well. 

Mr. JEFFRIES. Thank you. 

Mr. Hertling, as you understand it, does the Department of Justice civil division currently have any authority under law to address the trade secret issue? 

Mr. HERTLING. The Economic Espionage Act provides to the Attorney General an injunctive remedy to go into Federal court. I 

don’t know whether that right, whether that ability is exercised by 

the Civil Division. I suspect, because the nature of getting the department involved in these sorts of instances, that you are probably 

actually looking at the Criminal Division or, of course, typically the 

U.S. Attorney’s Office actually being the entity that would enforce 

that right rather than the Civil Division, but I don’t honestly know. 

Mr. JEFFRIES. Okay. Right. And most U.S. Attorneys’ Offices, certainly the ones that are located in the City of New York, have both 

a criminal division and a civil division present in the same office. 

Perhaps that is an issue in terms of greater enforcement relative 

to that injunctive provision that this Committee could also look at. 

And I think all four of you have indicated that you support a private right of action in the trade secret area, it certainly is something that I look forward to working with my colleagues on both 

sides of the aisle on. 

If one is created, when would it be appropriate for a company to 

go into Federal court, and in what instances would you envision 

companies taking advantage of the State court remedies that will 

remain on the books? 

Mr. HERTLING. Well, I think obviously for a company to get into 

Federal court in the first instance, there would have to be at a minimum an interstate nexus, an effect on interstate commerce and 

certainly an effect with—instances in which there is an international nexus. 

Otherwise it would be left to the—the choice of forum would be 

left typically to the plaintiff, and I think it would depend on the 

particular circumstances if there is—in an interstate or international case, if the concern is the thief absconding with the information physically, it probably is a benefit to file in Federal court, 

because the process that would be issued by Federal court could be 

enforced by a U.S. Marshal anywhere, whereas if you go into the 

State court, the process issued by a justice of Kings County Supreme Court, for example, doesn’t mean anything to a sheriff executing a process in California. 

So whereas the U.S. Marshal in San Francisco would enforce an 

order of a Federal District Judge from the Eastern District of New 

York, just as he would process issued by a Judge of the U.S. District Court for the Northern District of California, but if the matter 

is one in which the mis-appropriator absconds from Brooklyn to 

Staten Island, you probably wouldn’t need to go to Federal court. 

It is a question whether you could. If he absconds to New Jersey, 
107 

it would be up to the plaintiff to decide what the best forum is, and 

the factors would be the ease of relief, the comfort with the judiciary in the location. 

So there would be nothing in a Federal civil remedy that would 

preempt state law or preclude the plaintiff in choosing the forum 

in which to file. 

Mr. JEFFRIES. Thank you. 

I yield back. 

Mr. COBLE. I thank the gentleman. 

The distinguished gentleman from Pennsylvania, Mr. Marino, is 

recognized. 

Mr. MARINO. Thank you, Chairman. 

Gentlemen, I am pretty much a States rights guy and the less 

Federal Government in my life, the better. Tell me what, and anyone can speak to this. Tell me what requires fixing? Why do we 

need the Federalization here? 

Mr. HERTLING. Well, I think initially, as I mentioned to Mr. 

Jeffries, one of the things that needs fixing is, of course, each State 

enforces the judicial process issued by the judges of that particular 

State, and process issued by a judge in Pennsylvania is typically 

not going to be enforced by a sheriff in California. So if you have 

a big company in Harrisburg and somebody walks out with a 

thumb drive with some important trade secrets and drives from the 

facility, gets on a plane and flies to San Francisco, and from San 

Francisco, he is going to abscond to Beijing, if the owner of that 

business finds out that the person has walked out with a trade secret, he runs to common pleas court in Gotham County, the judge 

is going to issue process. 

You get that process out to the San Francisco sheriff, and the 

sheriff in San Francisco who’s going to—because you are looking to 

seize the thumb drive. 

Mr. MARINO. I was reading some cases preliminarily just before 

I got here. And let’s take, for example, the international court of 

justice gets involved. I think there was a case that—a case, a preliminary case that started out in one of the States here in the U.S. 

and it involved Canada, and I am—are you familiar with this case 

that I am talking about? And—— 

Mr. HERTLING. I am not. I was under the impression that the 

ICJ only heard cases between sovereigns, so I—but I am not an expert in international law. 

Mr. MARINO. Also the U.S. Federal court stepped in and raised 

an issue about a State having a right to hand down the decision 

that pertained to another country, and I am thinking it was Canada. Have you heard of that? I am trying to get more information 

on that explanation. 

Mr. HERTLING. I am—— 

Mr. MARINO. Is anyone else familiar with it? 

Mr. HERTLING. I am not—— 

Mr. MARINO. I will do some research on it, then. 

Mr. HERTLING. I am not familiar with it, but again, I think it is 

important that nothing—obviously there is no House bill that has 

been introduced yet, a broader bill, Ms. Lofgren, of course, has a 

barebones bill. So this would be something that the House would 

take and create, but nothing, say, in the bill that has been intro-
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duced in the Senate would preempt State law, foreclose the ability 

to go into State Court. This is a—a Federal remedy would be a 

complement to the existing State Court remedies, but not a replacement for them. 

Mr. MARINO. Do you only get one bite at either or—or a venue? 

If you lose in one, can you go to the other? 

Mr. HERTLING. Well, typically, obviously, unless it is a criminal 

case where you have—you know, the dual sovereign doctrine applies, but in the civil litigation context, you would generally have 

claim preclusion so that if you lose in—if you lose on those issues 

or issues that you could have raised in a previous suit, and you go 

to a different court, whether State or Federal, you are precluded 

if there is identity of parties between the two suits. 

Mr. MARINO. Mr. Simon, you have raised an issue, but I am 

sorry, I have been going in and out meeting with people, on seizure. Could you repeat that again for my benefit that I may not 

have heard concerning your concern with seizure? 

Mr. SIMON. Sure. I would be happy to. So we have a lot of people’s data in our systems. That data, because of the way our security algorithms and others mix, work, the data between the customers is mixed together. There is no one disk drive for any one 

customer, generally speaking. There are some exceptions, to be 

clear. 

The point being that under the current—some of the current proposals, the ability to come in and seize physical property would 

permit somebody to say, we think there is a mis-appropriator’s information here, go get that physical drive. That is the issue that 

we are concerned about. 

Mr. MARINO. All right. Thank you. 

I see my time has expired and I yield back. Thank you. 

Mr. COBLE. I thank the gentleman. 

This concludes today’s hearing. I appreciate those of you in the 

audience who stayed with us. Particularly appreciate the panelists 

for your contributions. 

Without objection, all Members will have 5 legislative days to 

submit a written—additional written questions for the witnesses or 

additional materials for the record. This hearing stands adjourned. 

[Whereupon, at 4:38 p.m., the Subcommittee was adjourned.] 

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