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[Congressional Bills 114th Congress]
[From the U.S. Government Publishing Office]
[S. 1890 Referred in House (RFH)]

<DOC>

114th CONGRESS
  2d Session
                                S. 1890

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                             April 11, 2016

               Referred to the Committee on the Judiciary

_______________________________________________________________________

                                 AN ACT

 
To amend chapter 90 of title 18, United States Code, to provide Federal 
  jurisdiction for the theft of trade secrets, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Defend Trade Secrets Act of 2016''.

SEC. 2. FEDERAL JURISDICTION FOR THEFT OF TRADE SECRETS.

    (a) In General.--Section 1836 of title 18, United States Code, is 
amended by striking subsection (b) and inserting the following:
    ``(b) Private Civil Actions.--
            ``(1) In general.--An owner of a trade secret that is 
        misappropriated may bring a civil action under this subsection 
        if the trade secret is related to a product or service used in, 
        or intended for use in, interstate or foreign commerce.
            ``(2) Civil seizure.--
                    ``(A) In general.--
                            ``(i) Application.--Based on an affidavit 
                        or verified complaint satisfying the 
                        requirements of this paragraph, the court may, 
                        upon ex parte application but only in 
                        extraordinary circumstances, issue an order 
                        providing for the seizure of property necessary 
                        to prevent the propagation or dissemination of 
                        the trade secret that is the subject of the 
                        action.
                            ``(ii) Requirements for issuing order.--The 
                        court may not grant an application under clause 
                        (i) unless the court finds that it clearly 
                        appears from specific facts that--
                                    ``(I) an order issued pursuant to 
                                Rule 65 of the Federal Rules of Civil 
                                Procedure or another form of equitable 
                                relief would be inadequate to achieve 
                                the purpose of this paragraph because 
                                the party to which the order would be 
                                issued would evade, avoid, or otherwise 
                                not comply with such an order;
                                    ``(II) an immediate and irreparable 
                                injury will occur if such seizure is 
                                not ordered;
                                    ``(III) the harm to the applicant 
                                of denying the application outweighs 
                                the harm to the legitimate interests of 
                                the person against whom seizure would 
                                be ordered of granting the application 
                                and substantially outweighs the harm to 
                                any third parties who may be harmed by 
                                such seizure;
                                    ``(IV) the applicant is likely to 
                                succeed in showing that--
                                            ``(aa) the information is a 
                                        trade secret; and
                                            ``(bb) the person against 
                                        whom seizure would be ordered--

                                                    ``(AA) 
                                                misappropriated the 
                                                trade secret of the 
                                                applicant by improper 
                                                means; or

                                                    ``(BB) conspired to 
                                                use improper means to 
                                                misappropriate the 
                                                trade secret of the 
                                                applicant;

                                    ``(V) the person against whom 
                                seizure would be ordered has actual 
                                possession of--
                                            ``(aa) the trade secret; 
                                        and
                                            ``(bb) any property to be 
                                        seized;
                                    ``(VI) the application describes 
                                with reasonable particularity the 
                                matter to be seized and, to the extent 
                                reasonable under the circumstances, 
                                identifies the location where the 
                                matter is to be seized;
                                    ``(VII) the person against whom 
                                seizure would be ordered, or persons 
                                acting in concert with such person, 
                                would destroy, move, hide, or otherwise 
                                make such matter inaccessible to the 
                                court, if the applicant were to proceed 
                                on notice to such person; and
                                    ``(VIII) the applicant has not 
                                publicized the requested seizure.
                    ``(B) Elements of order.--If an order is issued 
                under subparagraph (A), it shall--
                            ``(i) set forth findings of fact and 
                        conclusions of law required for the order;
                            ``(ii) provide for the narrowest seizure of 
                        property necessary to achieve the purpose of 
                        this paragraph and direct that the seizure be 
                        conducted in a manner that minimizes any 
                        interruption of the business operations of 
                        third parties and, to the extent possible, does 
                        not interrupt the legitimate business 
                        operations of the person accused of 
                        misappropriating the trade secret;
                            ``(iii)(I) be accompanied by an order 
                        protecting the seized property from disclosure 
                        by prohibiting access by the applicant or the 
                        person against whom the order is directed, and 
                        prohibiting any copies, in whole or in part, of 
                        the seized property, to prevent undue damage to 
                        the party against whom the order has issued or 
                        others, until such parties have an opportunity 
                        to be heard in court; and
                            ``(II) provide that if access is granted by 
                        the court to the applicant or the person 
                        against whom the order is directed, the access 
                        shall be consistent with subparagraph (D);
                            ``(iv) provide guidance to the law 
                        enforcement officials executing the seizure 
                        that clearly delineates the scope of the 
                        authority of the officials, including--
                                    ``(I) the hours during which the 
                                seizure may be executed; and
                                    ``(II) whether force may be used to 
                                access locked areas;
                            ``(v) set a date for a hearing described in 
                        subparagraph (F) at the earliest possible time, 
                        and not later than 7 days after the order has 
                        issued, unless the party against whom the order 
                        is directed and others harmed by the order 
                        consent to another date for the hearing, except 
                        that a party against whom the order has issued 
                        or any person harmed by the order may move the 
                        court at any time to dissolve or modify the 
                        order after giving notice to the applicant who 
                        obtained the order; and
                            ``(vi) require the person obtaining the 
                        order to provide the security determined 
                        adequate by the court for the payment of the 
                        damages that any person may be entitled to 
                        recover as a result of a wrongful or excessive 
                        seizure or wrongful or excessive attempted 
                        seizure under this paragraph.
                    ``(C) Protection from publicity.--The court shall 
                take appropriate action to protect the person against 
                whom an order under this paragraph is directed from 
                publicity, by or at the behest of the person obtaining 
                the order, about such order and any seizure under such 
                order.
                    ``(D) Materials in custody of court.--
                            ``(i) In general.--Any materials seized 
                        under this paragraph shall be taken into the 
                        custody of the court. The court shall secure 
                        the seized material from physical and 
                        electronic access during the seizure and while 
                        in the custody of the court.
                            ``(ii) Storage medium.--If the seized 
                        material includes a storage medium, or if the 
                        seized material is stored on a storage medium, 
                        the court shall prohibit the medium from being 
                        connected to a network or the Internet without 
                        the consent of both parties, until the hearing 
                        required under subparagraph (B)(v) and 
                        described in subparagraph (F).
                            ``(iii) Protection of confidentiality.--The 
                        court shall take appropriate measures to 
                        protect the confidentiality of seized materials 
                        that are unrelated to the trade secret 
                        information ordered seized pursuant to this 
                        paragraph unless the person against whom the 
                        order is entered consents to disclosure of the 
                        material.
                            ``(iv) Appointment of special master.--The 
                        court may appoint a special master to locate 
                        and isolate all misappropriated trade secret 
                        information and to facilitate the return of 
                        unrelated property and data to the person from 
                        whom the property was seized. The special 
                        master appointed by the court shall agree to be 
                        bound by a non-disclosure agreement approved by 
                        the court.
                    ``(E) Service of order.--The court shall order that 
                service of a copy of the order under this paragraph, 
                and the submissions of the applicant to obtain the 
                order, shall be made by a Federal law enforcement 
                officer who, upon making service, shall carry out the 
                seizure under the order. The court may allow State or 
                local law enforcement officials to participate, but may 
                not permit the applicant or any agent of the applicant 
                to participate in the seizure. At the request of law 
                enforcement officials, the court may allow a technical 
                expert who is unaffiliated with the applicant and who 
                is bound by a court-approved non-disclosure agreement 
                to participate in the seizure if the court determines 
                that the participation of the expert will aid the 
                efficient execution of and minimize the burden of the 
                seizure.
                    ``(F) Seizure hearing.--
                            ``(i) Date.--A court that issues a seizure 
                        order shall hold a hearing on the date set by 
                        the court under subparagraph (B)(v).
                            ``(ii) Burden of proof.--At a hearing held 
                        under this subparagraph, the party who obtained 
                        the order under subparagraph (A) shall have the 
                        burden to prove the facts supporting the 
                        findings of fact and conclusions of law 
                        necessary to support the order. If the party 
                        fails to meet that burden, the seizure order 
                        shall be dissolved or modified appropriately.
                            ``(iii) Dissolution or modification of 
                        order.--A party against whom the order has been 
                        issued or any person harmed by the order may 
                        move the court at any time to dissolve or 
                        modify the order after giving notice to the 
                        party who obtained the order.
                            ``(iv) Discovery time limits.--The court 
                        may make such orders modifying the time limits 
                        for discovery under the Federal Rules of Civil 
                        Procedure as may be necessary to prevent the 
                        frustration of the purposes of a hearing under 
                        this subparagraph.
                    ``(G) Action for damage caused by wrongful 
                seizure.--A person who suffers damage by reason of a 
                wrongful or excessive seizure under this paragraph has 
                a cause of action against the applicant for the order 
                under which such seizure was made, and shall be 
                entitled to the same relief as is provided under 
                section 34(d)(11) of the Trademark Act of 1946 (15 
                U.S.C. 1116(d)(11)). The security posted with the court 
                under subparagraph (B)(vi) shall not limit the recovery 
                of third parties for damages.
                    ``(H) Motion for encryption.--A party or a person 
                who claims to have an interest in the subject matter 
                seized may make a motion at any time, which may be 
                heard ex parte, to encrypt any material seized or to be 
                seized under this paragraph that is stored on a storage 
                medium. The motion shall include, when possible, the 
                desired encryption method.
            ``(3) Remedies.--In a civil action brought under this 
        subsection with respect to the misappropriation of a trade 
        secret, a court may--
                    ``(A) grant an injunction--
                            ``(i) to prevent any actual or threatened 
                        misappropriation described in paragraph (1) on 
                        such terms as the court deems reasonable, 
                        provided the order does not--
                                    ``(I) prevent a person from 
                                entering into an employment 
                                relationship, and that conditions 
                                placed on such employment shall be 
                                based on evidence of threatened 
                                misappropriation and not merely on the 
                                information the person knows; or
                                    ``(II) otherwise conflict with an 
                                applicable State law prohibiting 
                                restraints on the practice of a lawful 
                                profession, trade, or business;
                            ``(ii) if determined appropriate by the 
                        court, requiring affirmative actions to be 
                        taken to protect the trade secret; and
                            ``(iii) in exceptional circumstances that 
                        render an injunction inequitable, that 
                        conditions future use of the trade secret upon 
                        payment of a reasonable royalty for no longer 
                        than the period of time for which such use 
                        could have been prohibited;
                    ``(B) award--
                            ``(i)(I) damages for actual loss caused by 
                        the misappropriation of the trade secret; and
                            ``(II) damages for any unjust enrichment 
                        caused by the misappropriation of the trade 
                        secret that is not addressed in computing 
                        damages for actual loss; or
                            ``(ii) in lieu of damages measured by any 
                        other methods, the damages caused by the 
                        misappropriation measured by imposition of 
                        liability for a reasonable royalty for the 
                        misappropriator's unauthorized disclosure or 
                        use of the trade secret;
                    ``(C) if the trade secret is willfully and 
                maliciously misappropriated, award exemplary damages in 
                an amount not more than 2 times the amount of the 
                damages awarded under subparagraph (B); and
                    ``(D) if a claim of the misappropriation is made in 
                bad faith, which may be established by circumstantial 
                evidence, a motion to terminate an injunction is made 
                or opposed in bad faith, or the trade secret was 
                willfully and maliciously misappropriated, award 
                reasonable attorney's fees to the prevailing party.
    ``(c) Jurisdiction.--The district courts of the United States shall 
have original jurisdiction of civil actions brought under this section.
    ``(d) Period of Limitations.--A civil action under subsection (b) 
may not be commenced later than 3 years after the date on which the 
misappropriation with respect to which the action would relate is 
discovered or by the exercise of reasonable diligence should have been 
discovered. For purposes of this subsection, a continuing 
misappropriation constitutes a single claim of misappropriation.''.
    (b) Definitions.--Section 1839 of title 18, United States Code, is 
amended--
            (1) in paragraph (3)--
                    (A) in subparagraph (B), by striking ``the public'' 
                and inserting ``another person who can obtain economic 
                value from the disclosure or use of the information''; 
                and
                    (B) by striking ``and'' at the end;
            (2) in paragraph (4), by striking the period at the end and 
        inserting a semicolon; and
            (3) by adding at the end the following:
            ``(5) the term `misappropriation' means--
                    ``(A) acquisition of a trade secret of another by a 
                person who knows or has reason to know that the trade 
                secret was acquired by improper means; or
                    ``(B) disclosure or use of a trade secret of 
                another without express or implied consent by a person 
                who--
                            ``(i) used improper means to acquire 
                        knowledge of the trade secret;
                            ``(ii) at the time of disclosure or use, 
                        knew or had reason to know that the knowledge 
                        of the trade secret was--
                                    ``(I) derived from or through a 
                                person who had used improper means to 
                                acquire the trade secret;
                                    ``(II) acquired under circumstances 
                                giving rise to a duty to maintain the 
                                secrecy of the trade secret or limit 
                                the use of the trade secret; or
                                    ``(III) derived from or through a 
                                person who owed a duty to the person 
                                seeking relief to maintain the secrecy 
                                of the trade secret or limit the use of 
                                the trade secret; or
                            ``(iii) before a material change of the 
                        position of the person, knew or had reason to 
                        know that--
                                    ``(I) the trade secret was a trade 
                                secret; and
                                    ``(II) knowledge of the trade 
                                secret had been acquired by accident or 
                                mistake;
            ``(6) the term `improper means'--
                    ``(A) includes theft, bribery, misrepresentation, 
                breach or inducement of a breach of a duty to maintain 
                secrecy, or espionage through electronic or other 
                means; and
                    ``(B) does not include reverse engineering, 
                independent derivation, or any other lawful means of 
                acquisition; and
            ``(7) the term `Trademark Act of 1946' means the Act 
        entitled `An Act to provide for the registration and protection 
        of trademarks used in commerce, to carry out the provisions of 
        certain international conventions, and for other purposes, 
        approved July 5, 1946 (15 U.S.C. 1051 et seq.) (commonly 
        referred to as the ``Trademark Act of 1946'' or the ``Lanham 
        Act'')'.''.
    (c) Exceptions to Prohibition.--Section 1833 of title 18, United 
States Code, is amended, in the matter preceding paragraph (1), by 
inserting ``or create a private right of action for'' after 
``prohibit''.
    (d) Conforming Amendments.--
            (1) The section heading for section 1836 of title 18, 
        United States Code, is amended to read as follows:
``Sec. 1836. Civil proceedings''.
            (2) The table of sections for chapter 90 of title 18, 
        United States Code, is amended by striking the item relating to 
        section 1836 and inserting the following:

``1836. Civil proceedings.''.
    (e) Effective Date.--The amendments made by this section shall 
apply with respect to any misappropriation of a trade secret (as 
defined in section 1839 of title 18, United States Code, as amended by 
this section) for which any act occurs on or after the date of the 
enactment of this Act.
    (f) Rule of Construction.--Nothing in the amendments made by this 
section shall be construed to modify the rule of construction under 
section 1838 of title 18, United States Code, or to preempt any other 
provision of law.
    (g) Applicability to Other Laws.--This section and the amendments 
made by this section shall not be construed to be a law pertaining to 
intellectual property for purposes of any other Act of Congress.

SEC. 3. TRADE SECRET THEFT ENFORCEMENT.

    (a) In General.--Chapter 90 of title 18, United States Code, is 
amended--
            (1) in section 1832(b), by striking ``$5,000,000'' and 
        inserting ``the greater of $5,000,000 or 3 times the value of 
        the stolen trade secret to the organization, including expenses 
        for research and design and other costs of reproducing the 
        trade secret that the organization has thereby avoided''; and
            (2) in section 1835--
                    (A) by striking ``In any prosecution'' and 
                inserting the following:
    ``(a) In General.--In any prosecution''; and
                    (B) by adding at the end the following:
    ``(b) Rights of Trade Secret Owners.--The court may not authorize 
or direct the disclosure of any information the owner asserts to be a 
trade secret unless the court allows the owner the opportunity to file 
a submission under seal that describes the interest of the owner in 
keeping the information confidential. No submission under seal made 
under this subsection may be used in a prosecution under this chapter 
for any purpose other than those set forth in this section, or 
otherwise required by law. The provision of information relating to a 
trade secret to the United States or the court in connection with a 
prosecution under this chapter shall not constitute a waiver of trade 
secret protection, and the disclosure of information relating to a 
trade secret in connection with a prosecution under this chapter shall 
not constitute a waiver of trade secret protection unless the trade 
secret owner expressly consents to such waiver.''.
    (b) RICO Predicate Offenses.--Section 1961(1) of title 18, United 
States Code, is amended by inserting ``sections 1831 and 1832 (relating 
to economic espionage and theft of trade secrets),'' before ``section 
1951''.

SEC. 4. REPORT ON THEFT OF TRADE SECRETS OCCURRING ABROAD.

    (a) Definitions.--In this section:
            (1) Director.--The term ``Director'' means the Under 
        Secretary of Commerce for Intellectual Property and Director of 
        the United States Patent and Trademark Office.
            (2) Foreign instrumentality, etc.--The terms ``foreign 
        instrumentality'', ``foreign agent'', and ``trade secret'' have 
        the meanings given those terms in section 1839 of title 18, 
        United States Code.
            (3) State.--The term ``State'' includes the District of 
        Columbia and any commonwealth, territory, or possession of the 
        United States.
            (4) United states company.--The term ``United States 
        company'' means an organization organized under the laws of the 
        United States or a State or political subdivision thereof.
    (b) Reports.--Not later than 1 year after the date of enactment of 
this Act, and biannually thereafter, the Attorney General, in 
consultation with the Intellectual Property Enforcement Coordinator, 
the Director, and the heads of other appropriate agencies, shall submit 
to the Committees on the Judiciary of the House of Representatives and 
the Senate, and make publicly available on the Web site of the 
Department of Justice and disseminate to the public through such other 
means as the Attorney General may identify, a report on the following:
            (1) The scope and breadth of the theft of the trade secrets 
        of United States companies occurring outside of the United 
        States.
            (2) The extent to which theft of trade secrets occurring 
        outside of the United States is sponsored by foreign 
        governments, foreign instrumentalities, or foreign agents.
            (3) The threat posed by theft of trade secrets occurring 
        outside of the United States.
            (4) The ability and limitations of trade secret owners to 
        prevent the misappropriation of trade secrets outside of the 
        United States, to enforce any judgment against foreign entities 
        for theft of trade secrets, and to prevent imports based on 
        theft of trade secrets overseas.
            (5) A breakdown of the trade secret protections afforded 
        United States companies by each country that is a trading 
        partner of the United States and enforcement efforts available 
        and undertaken in each such country, including a list 
        identifying specific countries where trade secret theft, laws, 
        or enforcement is a significant problem for United States 
        companies.
            (6) Instances of the Federal Government working with 
        foreign countries to investigate, arrest, and prosecute 
        entities and individuals involved in the theft of trade secrets 
        outside of the United States.
            (7) Specific progress made under trade agreements and 
        treaties, including any new remedies enacted by foreign 
        countries, to protect against theft of trade secrets of United 
        States companies outside of the United States.
            (8) Recommendations of legislative and executive branch 
        actions that may be undertaken to--
                    (A) reduce the threat of and economic impact caused 
                by the theft of the trade secrets of United States 
                companies occurring outside of the United States;
                    (B) educate United States companies regarding the 
                threats to their trade secrets when taken outside of 
                the United States;
                    (C) provide assistance to United States companies 
                to reduce the risk of loss of their trade secrets when 
                taken outside of the United States; and
                    (D) provide a mechanism for United States companies 
                to confidentially or anonymously report the theft of 
                trade secrets occurring outside of the United States.

SEC. 5. SENSE OF CONGRESS.

    It is the sense of Congress that--
            (1) trade secret theft occurs in the United States and 
        around the world;
            (2) trade secret theft, wherever it occurs, harms the 
        companies that own the trade secrets and the employees of the 
        companies;
            (3) chapter 90 of title 18, United States Code (commonly 
        known as the ``Economic Espionage Act of 1996''), applies 
        broadly to protect trade secrets from theft; and
            (4) it is important when seizing information to balance the 
        need to prevent or remedy misappropriation with the need to 
        avoid interrupting the--
                    (A) business of third parties; and
                    (B) legitimate interests of the party accused of 
                wrongdoing.

SEC. 6. BEST PRACTICES.

    (a) In General.--Not later than 2 years after the date of enactment 
of this Act, the Federal Judicial Center, using existing resources, 
shall develop recommended best practices for--
            (1) the seizure of information and media storing the 
        information; and
            (2) the securing of the information and media once seized.
    (b) Updates.--The Federal Judicial Center shall update the 
recommended best practices developed under subsection (a) from time to 
time.
    (c) Congressional Submissions.--The Federal Judicial Center shall 
provide a copy of the recommendations developed under subsection (a), 
and any updates made under subsection (b), to the--
            (1) Committee on the Judiciary of the Senate; and
            (2) Committee on the Judiciary of the House of 
        Representatives.

SEC. 7. IMMUNITY FROM LIABILITY FOR CONFIDENTIAL DISCLOSURE OF A TRADE 
              SECRET TO THE GOVERNMENT OR IN A COURT FILING.

    (a) Amendment.--Section 1833 of title 18, United States Code, is 
amended--
            (1) by striking ``This chapter'' and inserting ``(a) In 
        General.--This chapter'';
            (2) in subsection (a)(2), as designated by paragraph (1), 
        by striking ``the reporting of a suspected violation of law to 
        any governmental entity of the United States, a State, or a 
        political subdivision of a State, if such entity has lawful 
        authority with respect to that violation'' and inserting ``the 
        disclosure of a trade secret in accordance with subsection 
        (b)''; and
            (3) by adding at the end the following:
    ``(b) Immunity From Liability for Confidential Disclosure of a 
Trade Secret to the Government or in a Court Filing.--
            ``(1) Immunity.--An individual shall not be held criminally 
        or civilly liable under any Federal or State trade secret law 
        for the disclosure of a trade secret that--
                    ``(A) is made--
                            ``(i) in confidence to a Federal, State, or 
                        local government official, either directly or 
                        indirectly, or to an attorney; and
                            ``(ii) solely for the purpose of reporting 
                        or investigating a suspected violation of law; 
                        or
                    ``(B) is made in a complaint or other document 
                filed in a lawsuit or other proceeding, if such filing 
                is made under seal.
            ``(2) Use of trade secret information in anti-retaliation 
        lawsuit.--An individual who files a lawsuit for retaliation by 
        an employer for reporting a suspected violation of law may 
        disclose the trade secret to the attorney of the individual and 
        use the trade secret information in the court proceeding, if 
        the individual--
                    ``(A) files any document containing the trade 
                secret under seal; and
                    ``(B) does not disclose the trade secret, except 
                pursuant to court order.
            ``(3) Notice.--
                    ``(A) In general.--An employer shall provide notice 
                of the immunity set forth in this subsection in any 
                contract or agreement with an employee that governs the 
                use of a trade secret or other confidential 
                information.
                    ``(B) Policy document.--An employer shall be 
                considered to be in compliance with the notice 
                requirement in subparagraph (A) if the employer 
                provides a cross-reference to a policy document 
                provided to the employee that sets forth the employer's 
                reporting policy for a suspected violation of law.
                    ``(C) Non-compliance.--If an employer does not 
                comply with the notice requirement in subparagraph (A), 
                the employer may not be awarded exemplary damages or 
                attorney fees under subparagraph (C) or (D) of section 
                1836(b)(3) in an action against an employee to whom 
                notice was not provided.
                    ``(D) Applicability.--This paragraph shall apply to 
                contracts and agreements that are entered into or 
                updated after the date of enactment of this subsection.
            ``(4) Employee defined.--For purposes of this subsection, 
        the term `employee' includes any individual performing work as 
        a contractor or consultant for an employer.
            ``(5) Rule of construction.--Except as expressly provided 
        for under this subsection, nothing in this subsection shall be 
        construed to authorize, or limit liability for, an act that is 
        otherwise prohibited by law, such as the unlawful access of 
        material by unauthorized means.''.
    (b) Technical and Conforming Amendment.--Section 1838 of title 18, 
United States Code, is amended by striking ``This chapter'' and 
inserting ``Except as provided in section 1833(b), this chapter''.

            Passed the Senate April 4, 2016.

            Attest:

                                                JULIE E. ADAMS,

                                                             Secretary.
```