Opening Statement

Statement of the Honorable John Conyers, Jr.
for the Hearing on:  Trade Secrets: Promoting and Protecting American Innovation, Competitiveness and Market Access in Foreign Markets
Before the Subcommittee on Courts, Intellectual Property and the Internet

Tuesday, June 24, 2014, at 1:30 p.m.
2141 Rayburn House Office Building

     This hearing will allow us to examine trade secrets law and consider whether there should be revisions or any updates to the law.   As we examine these issues there are several things that we should keep in mind.

     First, trade secrets are increasingly valuable to American firms but misappropriation has continued to rise and remains a big problem. Trade secrets shelter confidential information, which can include things like marketing data, manufacturing processes or techniques, customer lists, marketing strategies, and sales techniques.

     As the witnesses will discuss today, trade secrets are extremely valuable.  According to an estimate from 2009, the value of trade secrets owned by U.S. companies was five trillion dollars.  This valuable property is, unfortunately, also extremely vulnerable to theft.  More than a decade ago, government sources projected that the loss of intellectual property for American businesses due to cyber espionage was $200 billion to $300 billion per year. 

     U.S. companies have struggled to protect trade secrets due to innovative technologies, which have made it easier for thieves to access sensitive trade secret information.  These technologies have allowed people to photograph and record data immediately. Trade secret protection may be lost forever once a trade secret has been revealed, or is made known to a competitor, and the damage is often irreparable.

     Second, we should continue to take steps to strengthen trade secrets law.  We took important steps last Congress but more must be done. Last Congress, we enacted two bills to increase trade secrets protection. The Theft of Trade Secrets Clarification Act of 2012 closed a loophole in the Economic Espionage Act (EEA) that had allowed the theft of trade secret source code.  The bill amended the EAA to clarify that the law covers trade secrets relating to products or services used or intended for use in interstate commerce. 

     We also strengthened trade secret law last Congress by passing the Foreign and Economic Espionage Penalty Enhancement Act of 2012. That bill increased criminal penalties for economic espionage, and directed the Sentencing Commission to consider adjusting offense levels for trade secret crimes.  Despite these enhancements, there currently is no federal civil cause of action for enforcement of trade secrets theft in federal court.

      Copyright, patent and trademark owners can enforce their rights in federal court.  Trade secret owners should have a similar remedy.  Indeed, trade secrets are critical intellectual property rights and should receive protection of federal laws, in addition to the state laws that have traditionally protected them.   People are now able to travel across state and national borders more easily and many U.S. companies are finding that reliance on state laws and procedures is no longer adequate for trade secret protection.  The inability of private parties to protect trade secrets in federal court has generated several calls for legislation to create such a right.  Those who support such a right have noted that a federal cause of action would give companies a critical tool to enforce their rights.  A federal civil cause of action would create national standards, and allow companies to craft one set of non-disclosure policies on a fifty state basis.  I would like to hear the witnesses discuss the benefits, and potential downsides, of a federal cause of action as well as any specific issues that we should address in such legislation. 

      Finally, we should consider what we can do to bolster the administration’s efforts to increase protections for trade secrets at home and abroad.  In 2013 the administration, through the U.S. Intellectual Property Enforcement Coordinator (IPEC), released the “Administration Strategy on Mitigating the Theft of U.S. Trade Secrets,” a five-pronged strategic approach to addressing trade secret theft.  That strategy calls for coordinated international engagement with trading partners, promotion of voluntary best practices by private industry, enhancement of domestic law enforcement operations, improvement of domestic legislation regarding trade secrets, and increased public awareness.

     The administration also has expressed concerns about news reports suggesting that some foreign countries – most notably, China – are playing an increasingly active role in theft of U.S. trade secrets.  In response, the administration has increased its enforcement efforts in this area as well.  In May of this year, for example, the Justice Department indicted five Chinese military hackers for economic espionage and trade secret theft for ongoing offenses involving six American companies.

     That indictment is a step in the right direction, but much more remains to be done.  I therefore look forward to hearing from our witnesses today about what we can and should do to strengthen trade secrets law.