New U.S. Trade Secret Legislation To Provide Expanded Protections for U.S. Businesses Operating Abroad

In late December, President Obama signed The Theft of Trade Secrets Clarification Act into law, expanding U.S. federal trade secret protections, particularly for U.S. businesses operating abroad. The Act redefines trade secret thefts qualifying for federal protections under the Economic Espionage Act (EEA), from those “related to or included in a product that is produced for or placed in” interstate and foreign commerce to those “related to a product or service used in or intended for use in” interstate and foreign commerce.

Although the Act’s language is a bit convoluted, it has two important ramifications for U.S. businesses operating abroad. First, the EEA now protects service-related trade secrets. This means that U.S. service-based businesses will have greater trade secret protections when operating abroad as any qualifying proprietary information they have created for use in foreign markets may qualify for EEA protections.  Beyond merely expanding legal protections for U.S. businesses abroad, these reforms reflect the U.S.’ increasing need to protect U.S. service exports, which have become the most dynamic sector in U.S. exports. While the U.S. has maintained an overall trade deficit for decades, it has maintained a substantial service export trade surplus during the same period.  According to the latest statistics available from the U.S. Department of Commerce’s Bureau of Economic Analysis, the U.S. had a $179 billion service export trade surplus in 2011 and has enjoyed 6 percent annual average surplus growth rates over the past five years. As U.S. businesses increasingly export their services abroad, possessing EEA protections for their trade secrets will provide such businesses vital legal protections in the years to come.

Second, the Act will provide protections for trade secrets that have yet to be used in commerce. By including trade secrets “intended for use” in domestic and international commerce, the EEA will now permit qualifying proprietary information developed for products and services yet to be offered at home or overseas to qualify for federal legal protections. These protections give U.S. businesses operating abroad protection for their trade secrets by not only providing them protection before they launch goods and service offerings abroad, but more importantly extending EEA protections to U.S. businesses who test goods for launch abroad within the U.S. As many leading U.S. businesses test products and service offerings in the U.S. prior to launching abroad, the EEA’s new protections help to ensure that such businesses can retain federal protection for qualifying proprietary information during domestic testing to ensure that international opportunities can be better realized.

How will The Theft of Trade Secrets Clarification Act impact your business?

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