In recent years Congress has shown considerable interest in promoting the strength and international competitiveness of U.S. industry. Several recent legislative proposals have concerned the intellectual property laws, a widely recognized mechanism for promoting innovation. In the 113 th Congress, H.R. 2466 , the Private Right of Action Against Theft of Trade Secrets Act of 2013, would introduce a private cause of action for misappropriation of trade secrets under federal law. S. 1770 , the Future of American Innovation and Research Act of 2013, would establish a private cause of action against a person who misappropriates a trade secret while located outside the United States, provided that the misappropriation causes or is reasonably anticipated to cause an injury within the United States or to a U.S. person. As of the date of publication of this report, neither bill had been enacted. The term "trade secret" generally refers to secret, commercially valuable information, including such subject matter as confidential formulae, techniques for manufacturing a product, and customer lists. Trade secret protection is largely a matter of state law. Under those laws, misappropriation of a trade secret may be enjoined by a court and the defendant may also be liable for compensatory and punitive damages. One notable federal statute, the Economic Espionage Act of 1996, makes the theft or misappropriation of a trade secret a federal crime under certain circumstances. Trade secrets play a role in U.S. innovation policy. Trade secrets may establish incentives to innovate because they provide a mechanism for firms to capture the benefits of their inventions. Yet trade secrets also have proven controversial because they suppress, rather than disclose, particular innovations to the public. They also may have a significant impact upon the mobility of highly trained employees between firms. Further, because innovators often face a mutually exclusive choice between patenting their inventions or maintaining them as trade secrets, alterations to one of these regimes may alter the perceived attractiveness of the other. This report provides an overview of the law and policy of trade secrets. It discusses the role of trade secrets in U.S. innovation policy. It then reviews the sources of trade secret law and the substantive rules that they provide. The report then provides a more detailed review of existing federal legislation that pertains to trade secrets. In its next section, the report then discusses the relationship between patent law and trade secret law. The report closes with an identification of congressional issues and options within this field. Many businesses have developed proprietary information that provides a competitive advantage because it is not known to others. This category may include "high-tech" information such as chemical formulae, manufacturing techniques, product design, and technical data. But it may also include relatively "low-tech" information such as customer lists, business leads, marketing strategies, pricing schedules, and sales techniques. Potentially of additional competitive value is "negative know-how": previously attempted, but flawed techniques or "blind alleys" that did not achieve their intended results. As the United States continues its shift to a knowledge- and service-based economy, the economic strength and competitiveness of firms increasingly depend upon their know-how and intangible assets. Leonard I. Nakamura, Assistant Vice President and Economist of the Federal Reserve Bank of Philadelphia, explains that in the U.S economy over the past half-century, "mass production and tangible investment have become less important, while new products . . . and intangible investment have become more important." One recent estimate placed the value of trade secrets owned by U.S. publicly traded companies at five trillion dollars. Another way of measuring the increasing importance of intangible assets is by considering the value of the Standard & Poor's 500. The "S&P 500" consists of the marketplace value of 500 large publicly held companies. In 1975, 16.8% of the total value of the S&P 500 reportedly consisted of intangible assets. In 2005, intangible assets reportedly constituted 79.7% of the total value of these firms. According to attorney R. Mark Halligan, "the vast bulk of intangible assets are trade secret assets." Yet the rise of computer technology, the ubiquity of cell phones and the Internet, and our transition to the Information Age have increased the difficulty that firms encounter in maintaining the confidentiality of their proprietary information. Years ago, the theft of trade secrets may have involved the taking of laboratory notebooks, memoranda, or other papers from a competitor's office despite the presence of security personnel or surveillance cameras. Today, a trade secret misappropriator can download proprietary information from company computers, or take photographs of confidential documents using a cell phone camera, within moments. As attorney Victoria A. Cundiff concisely states: "The digital world is no friend to trade secrets." As U.S. firms become increasingly immersed in global competition, some observers believe that foreign firms and even foreign governments have devoted significant resources towards industrial espionage. According to the Office of the National Counterintelligence Executive, "[t]he United States remains the prime target for foreign economic collection and industrial espionage by virtue of its global technological leadership and innovation." These efforts have been linked not just to the economic competitiveness of the United States, but also to its national security. The legal concept of trade secrets addresses these circumstances. Principles of trade secret law guard against the misappropriation of information that is not generally known. In view of the increasing prominence of information, it is unsurprising that Michael Risch, a member of the law faculty of the West Virginia University College of Law, asserts that trade secrets are "arguably the most important and most heavily litigated intellectual property right." Framing the trade secret law requires a balancing of competing interests. A robust trade secret law that provides strong protection to proprietary commercial information potentially holds many advantages. It may allow firms to capture the benefits of the costs and time it takes to develop the information, without having to share the benefits of that information with others. Trade secret law therefore may be seen as providing incentives to innovate. Trade secret law may also encourage firms to invest in human capital. A firm is more likely to invest in employee development if it has some confidence that employee cannot immediately use his knowledge in the service of a competitor. Firms may also establish a trade secret easily through self-help measures. Commercially valuable information is protected once a firm makes reasonable efforts to maintain it in confidence. There is no need for formal government involvement, in contrast to patents. Trade secret law also confirms and regulates standards of commercial ethics and morality. The misappropriation doctrine applies only against wrongdoers—those who have breached a duty of confidence, engaged in espionage, or otherwise acted in bad faith. Trade secret law thus recognizes that even within a marketplace based open free competition, certain kinds of competitive behavior step beyond our social norms and should be discouraged. On the other hand, trade secret laws potentially have negative aspects. First, although trade secret law may promote advancement, it might facilitate a particular kind of innovation—the development of information that is itself amenable to being kept secret. In addition, the protection of trade secrets necessarily requires firms to conceal their new developments. But as Judge Goldberg observed 40 years ago, "for our industrial competition to remain healthy there must be breathing room for observing a competing industrialist." Thus, while some degree of information protection may be needed to promote innovation, some amount of information sharing may be essential for competition and proper functioning of the market. As well, firms must expend resources to maintain information as a trade secret. Employees must sign confidentiality agreements, locks and safes must be installed, and electronic protection measures must be in place on computer systems. These measures entail time and expense. Employers also may be encouraged to limit access to valuable information to select employees. Disclosing valuable trade secrets on a "need to know" basis to one's employees may restrict employee development and ultimately hinder the operation of the firm. Trade secret law may negatively impact employee mobility. Individuals who are unable to take their knowledge from job to job may be limited in their ability to change employers. As explained by Alan L. Durham, a member of the law faculty of the University of Alabama, an overly robust view of trade secret law potentially may "limit individual freedom, weaken employee bargaining power, and harm society through diminished competition." The various rules that together comprise the discipline of trade secret law may be fashioned in an effort to maximize the potential advantages of trade secrets while minimizing their disadvantages. This report next provides a more detailed review of the doctrines that regulate the acquisition and enforcement of trade secrets. While it has been written that an "exact definition of a trade secret is not possible," a trade secret generally consists of secret, commercially valuable information. As explained by Henry Perritt, Jr., a member of the faculty of the Chicago-Kent College of Law, "trade secret subject matter includes any of the major functions of business enterprise: production and operations, engineering and research and development, marketing, finance, purchasing, and management." Specific examples of trade secret subject matter include customer lists, manufacturing processes, marketing strategies, pricing information, product design, recipes, and sales techniques. One court has described trade secrets as follows: A trade secret is really just a piece of information (such as a customer list, or a method of production, or a secret formula for a soft drink) that the holder tries to keep secret by executing confidentiality agreements with employees and others and by hiding the information from outsiders by means of fences, safes, encryption, and other means of concealment, so that the only way the secret can be unmasked is by a breach of contract or a tort. Whether information qualifies as a "trade secret" is a question of fact that may be determined by a jury.