The Defend Trade Secrets Act (DTSA) Can Apply To Acts of Misappropriation Occurring Entirely Outside the United States
After deliberating less than three hours, a jury in the Northern District of Illinois recently awarded Motorola Solutions over $700 million in damages for a civil claim arising under the Defend Trade Secrets Act (“DTSA”). Motorola Sols., Inc. v. Hytera Commc’ns Corp., Ltd., No. 1:17-cv-1973, ECF No. 834 (N.D. Ill. Jan. 31, 2020). Most remarkable about this claim, however, was not the size of the jury award or the swiftness of the jury’s deliberations. Rather, for the first time, a U.S. court held that a civil action for private damages under the DTSA can arise from acts of misappropriation that occur completely outside the United States as long as they have a nexus with some activity in the United States.
Absent an affirmative statement of congressional intent, the general rule is that a statute passed by Congress has only domestic applicability. In 1996, Congress codified the Economic Espionage Act (“EEA”), creating federal criminal liability for the misappropriation of trade secrets. Section 1837 of the EEA expressly allows extraterritorial application of its provisions, stating that the statute applies to acts occurring outside the U.S. if the offender is a natural person who is a U.S. citizen or permanent resident or the act was committed in the U.S.
In 2016, Congress enacted the DTSA as Section 1836 within the existing EEA. The DTSA created a private civil right of action in federal court for owners of trade secrets misappropriated by others.
1836 (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.
The Motorola court reasoned that because the DTSA simply added a right, and did not change the EEA’s existing interpretation, the chapter should be read as a whole, including the extraterritoriality section.
In this case, Motorola alleged that Hytera Communications, a Chinese company, hired away three engineers who took with them thousands of Motorola’s confidential technical documents, including source code and trade secrets. The jury found that Hytera used the confidential documents to develop digital radios that are indistinguishable from Motorola’s radios. Hytera sold the radios worldwide, including in the U.S. After thoroughly reviewing the facts of the case and the applicability of the statue, the Court found use of the trade secrets in the U.S. sufficient to support a DTSA claim: “Defendants have advertised, promoted, and marketed products embodying the allegedly stolen trade secrets domestically at numerous trade shows. This constitutes ‘use’” under the DTSA, even if the acts of misappropriation occurred entirely outside U.S. territory.
While some other district courts had assumed the DTSA applies extraterritoriality, the Motorola court noted the absence of any controlling precedent regarding the matter. Referring to the inclusion of the words “this chapter,” as well as Congressional notes accompanying the statue, the court held that Congress’s clear intent was that the DTSA may apply extraterritorially in a private cause of action if:
(1) the offender is a natural person who is a citizen or permanent resident alien of the United States, or an organization organized under the laws of the United States or a State or political subdivision thereof; or
(2) an act in furtherance of the offense was committed in the United States.
18 U.S. §1837.
Given the advantages of U.S. discovery tools and the broad scope of damages available under a DTSA claim (for example, unlike most intellectual property claims, DTSA claims are not limited to U.S. sales), the Motorola case establishes the increasing value of DTSA claims as an important weapon in the protection of U.S. intellectual property from misuse abroad.