November 28, 2022

Volume XII, Number 332


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.

© Copyright 2022 Squire Patton Boggs (US) LLPNational Law Review, Volume X, Number 56

About this Author

David Elkins Intellectual Property Attorney Squire Patton Boggs Palo Alto, CA

David Elkins has led our global Intellectual Property & Technology Practice Group since 2010. Based in Silicon Valley, David serves as lead trial and arbitration counsel in patent, trademark, trade dress, trade secret, false advertising and copyright actions nationwide.

Following outstanding client feedback, David has been named a “star lawyer” in the Acritas Stars™ global database from 2017 to present. “He’s a very dedicated lawyer and we can have full confidence and trust that he will act in our interests”; “The quality of his advice: it is sharp, it is to the point, and it’s...

Ronald S. Lemieux Intellectual Property Attorney Squire Patton Boggs Palo Alto, CA

Ron Lemieux has served as lead counsel in more than 200 intellectual property disputes for clients such as ASUS, Sony Computer Entertainment America, PINC Solutions, MediaTek, ChipMOS Technologies, Rohm, Olympus, Konami Digital Entertainment, Silicon Graphics, Sumitronics, IDT, Winbond, FIC, Pegatron, Sakata Seeds, and Royal Sluis, among others. He has extensive trial experience and has taken more than 20 cases to final verdict in both jury and bench trials in courtrooms nationwide. Ron has also argued several successful appeals before the Federal Circuit.

Theresa Rakocy, Squire Patton Boggs Law Firm, Cleveland, Intellectual Property and Litigation Law Attoney

Theresa Rakocy focuses her practice on intellectual property issues, including patent infringement litigation, patent prosecution and opinion work. She has experience preparing and prosecuting US and foreign patents in a variety of technical fields, including software and electrical computer arts with particular expertise in wireless mobile communication technology, medical diagnostic and monitoring systems, clinical workflow management systems, document preparation and management workflow, and digital imaging technologies. She prepares patent applications, conducts...