Bill Would Allow Civil Suits against Foreign Entities for Trade Secret Theft

Senator Jeff Flake (R-Ariz.) has sponsored a bill which would allow civil suits against any foreign person who “misappropriates, threatens to misappropriate, or conspires to misappropriate” a US trade secret.

Senate Bill 1770 is entitled the “Future of American Innovation and Research Act of 2013.”

The bill would extend the jurisdiction of US District Courts to entities “located outside the territorial jurisdiction of the United States” or acting “on behalf of, or for the benefit of” an entity located outside the United States.

The bill defines trade secrets to mean:

any information, including a formula, pattern, compilation, program, device, method, technique, or process, that—

(A) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, the public or other persons who can obtain economic value from the disclosure or use of the information; and

(B) is the subject of efforts that are reasonable under the circumstances to maintain the secrecy of the information.

The bill deals with trade secrets discovered by “improper means,” defined to include “theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, and espionage through electronic or other means.”

“Improper means” do not include reverse engineering or independent derivation alone.

Remedies for violations of the Act would include injunctions, reasonable royalties, and damages.

Trade secret owners can already bring complaints before the International Trade Commission (ITC) concerning misappropriation of trade secrets by foreign entities.  A 2011 case, TianRui Group Co. Ltd. v. U.S. Int’l Trade Comm’n, held that Section 337 of the Tariff Act of 1930 applied to trade secret misappropriation even where the act occurred outside the US.

 

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Anti-Patent-Troll Bill Passes US House of Representatives

A bill known as the Innovation Act has passed the House of Representatives and is headed to the Senate.  The bill, sponsored by Congressman Bob Goodlatte, is designed to prevent “abusive patent litigation.”

Some companies known as “patent assertion entities,” “non-practicing entities,” or (less politely) “patent trolls” have been criticized for actions such as sending large numbers of demand letters to small businesses, claiming patent royalties without first determining whether the recipients were actually infringing any patents.

For example, one such entity threatened to sue about 8,000 hotels, coffee shops, and retail stores, claiming that they infringed its patents by setting up Wi-Fi networks for their patrons.

Congressman Goodlatte said that his bill was designed to discourage lawsuits that “target a settlement just under what it would cost for litigation, knowing that these businesses will want to avoid costly litigation and probably pay up.”

Among other things, the Innovation Act requires disclosure of the identity of the ultimate entity that owns the patents asserted in litigation, to prevent patent owners from hiding behind shell companies and sending multiple demand letters to the same targets.

The Act could affect a wide range of patent holders, and not just so-called patent trolls.

The bill would require patent holders to plead patent infringement more specifically, with reference to infringing products by name and model number.  The patent holder would also have to identify which claims of a patent are being infringed on an element-by-element basis with reference to the purportedly infringing products.

The Innovation Act would also create a version of the “loser pays” system that applies in many other countries.  The Act states that “a court shall award, to a prevailing party, reasonable fees and other expenses incurred by that party.”

However, the Act also gives a court the discretion to decline to award fees if “the position and conduct of the non-prevailing party or parties were reasonably justified in law and fact” or if “special circumstances” would “make an award unjust.”

The Act prevents patent holders from using an alleged infringer’s failure to settle in response to a demand letter as evidence of willful infringement, unless the letter set out with particularity the identity of the patent owner, which patents had allegedly been infringed, and the manner in which the patents had allegedly been infringed.

Opponents of the bill argue that it will discourage legitimate inventors with meritorious claims and favor wealthy parties which can afford to risk being liable for other parties’ costs.  They say that the bill does not fix real “patent troll” problems.

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“After Final Consideration” Pilot Program Extended by Patent Office

The US Patent and Trademark Office (USPTO) announced that it is extending a popular program that allows patent applicants to submit minor amendments to patent applications even after a final rejection.

The “After Final Consideration” Pilot was launched in May and was scheduled to end on September 30, 2013.  The Pilot will now be extended to include requests filed on or before September 30, 2014.

The Pilot is one of the programs the Patent Office is adopting to reduce the backlog of 90,000 pending patent applications associated with a Request for Continued Examination (RCE).  An RCE is a request by a patent applicant to reopen prosecution of a patent application after a final rejection.

The Pilot also allows patent applicants to potentially avoid the delay and cost associated with an RCE.

Applicants for the Pilot must submit a request and certification for consideration, an amendment to at least one independent patent claim, and any fees that may be required.  The amendment must not “broaden the scope of the independent claim in any aspect.”

The patent applicant must also be willing and available to be interviewed by a patent examiner.

A patent examiner will review the amendment and determine whether it should be accepted for further examination by the USPTO.  The amendment is more likely to be accepted if:

• the amendment cancels claims or complies with formal requirements in response to objections made in the final patent office action;
• the amendment rewrites objected-to claims in independent form;  or
• the amendment incorporates limitations from objected-to claims into independent claims, “if the new claim[s] can be determined to be allowable with only a limited amount of further consideration or search” by the patent examiner.

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Congress Considers New Trade Secret Bills

The US Congress has recently passed two bills to protect trade secrets and is working on more.

The Theft of Trade Secrets Clarification Act was passed in 2012 in response to a court decision overturning the trade theft conviction of former Goldman Sachs programmer Sergey  Aleynikov.

As previously reported, Goldman has been ordered to pay about $1.7 million (so far) for Aleynikov’s legal fees.

Another act passed in 2012, the Foreign and Economic Espionage Penalty Enhancement Act of 2012, increased penalties for trade secret theft.

Reports that the Chinese military had hacked into the computers of US businesses to steal trade secrets have led to even more trade secret protection bills.

Representative Zoe Lofgren (D-CA) has introduced the Private Right of Action Against Theft of Trade Secrets Act of 2013 (H.R. 2466).  This act would give individuals and companies a right of action under the federal Economic Espionage Act of 1996 (EEA) to sue those who misappropriate trade secrets.  The EEA now only allows federal prosecutors to file criminal trade secret cases.

 

Senator Jeff Flake (R-AZ) introduced the Future of American Innovation and Research Act (S. 1770), which would create a private right of action for trade secret theft by foreign entities.  The act would give US federal courts jurisdiction over thefts by foreign entities that injure a US citizen or cause an injury within the United States.

Representative Mike Rogers (R-MI) introduced the Cyber Economic Espionage Accountability Act (H.R. 2281) and Senator Carol Levin (D-MI) introduced the Deter Cyber Theft Act (S. 884).

The Cyber Economic Espionage Accountability Act would allow federal agencies to penalize foreign officials that committed or aided cyber-espionage and trade secret theft.  Penalties would include freezing assets, banning travel to the US, and other measures.

The Deter Cyber Theft Act would create a “watch list” of counties that engage in “economic or industrial espionage in cyberspace with respect to United States trade secrets or proprietary information.”

In order for information to be protected as a trade secret under either state or federal law, a company that owns the so-called secrets must take adequate steps to maintain the confidentiality of the information.

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USPTO Offers New Tool to Determine Patent Term

The U.S. Patent and Trademark Office recently announced a new tool for patent holders. The online calculator enables members of the public to estimate the expiration date of a utility, plant, or design patent.

In general, patents based on applications filed after June 8, 1995 last for 20 years, starting from the application’s filing date. However, the patent termcan be shortened or extended by a number of factors, including:

• Type of application (utility, design, plant);
• Filing date of the application;
• The grant date of the patent;
• Benefit claims under 35 U.S.C. § 120, 121 or 365(c);
• Patent term adjustments and extensions under 35 U.S.C. § 154;
• Patent term extensions under 35 U.S.C. § 156;
• Terminal disclaimer(s); and
• Timely payment of maintenance fees.

As detailed by the USPTO, its new calculator tool “provides a best estimate of a patent’s expiration date, based on a comprehensive list of factors than can be found in USPTO records.” The calculator can be downloaded at www.uspto.gov/patents/law/patent_term_calculator.jsp.

While the calculator can provide valuable information, we recommend that individuals and companies still consult with an experienced patent attorney to determine if a patent is still in force. The USPTO also agrees, noting, “Before relying on an expiration date, individuals should always carefully inspect all relevant documents available through the USPTO, court records and elsewhere, and consult with an attorney.”

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Success Under the AIA’s “First to File” System Requires Strategy Shift

Navigating the numerous changes under the America Invents Act (AIA) can be challenging. One of the most significant changes — the adoption to a first to file system — requires inventors to more carefully consider the timing of patent applications.

To take full advantage of the new regime, companies should be prepared to file “early and often.”

Under the AIA, a patent application will be denied based on prior art if “the claimed invention was patented, described in a printed publication, or in public use, on sale, or otherwise available to the public before the effective filing date of the claimed invention.” The provision expands the activities and publications that are considered to be “prior art” to patent applications.

Nonetheless, there are several key exceptions. For instance, if the inventor or another who obtained the subject matter from the inventor makes the disclosure, it is not considered prior art. In addition, disclosures made by a third party for subject matter that had been previously publicly disclosed by the inventor also fall under the exception. To qualify under the one-year grace period, these disclosures must be made within one year prior to filing a patent application.  The scope of these exceptions remains to be determined.  What if the invention was on sale privately but not “available to the public?”  Does that start the one year clock?

In light of the changes, it is advantageous to file a provisional patent application as soon as practically possible. These patent applications are relatively low cost and require far less documentation that a standard, non-provisional patent application.

After the initial filing, inventors should file additional provisional patent applications that reflect improvements to the invention in the form of additional patentable subject matter. So long as a non-provisional patent application is filed within one year, the disclosures can be combined into a single filing.

In summary, filing early and often is the best way to prevent headaches down the road, including subsequent and intervening disclosures.

If you need any help with Intellectual Property issues, from filing a patent, trademark or copyright, or just need advice regarding how best to protect your inventions, ideas or your brand, please contact me at 1-855-UR IDEAS (1-855-874-3327). Stay up-to-date on the latest Intellectual Property Law news from Sheldon Mak & Anderson.

Related articles

• The Benefits of a Provisional Patent Application (ipwatchdog.com)

Copyright Holders Call on Congress for Stronger Protection

In the first of several hearings regarding the future of the U.S. copyright system, content creators argued for stronger protections before the House Judiciary Subcommittee on Courts, Intellectual Property, and the Internet. The hearing featured testimony from representatives of the Copyright Alliance, Getty Images Inc., the American Society of Media Photographers, Yep Roc Records and Redeye Distribution Inc., and 3-D moviemaker Stereo D LLC

As we have previously discussed on this IP Law Blog, Congress recently embarked on a broad review of U.S. copyright laws with the goal of updating the country’s copyright protection scheme. With the exception of the Digital Millennium Copyright Act, most other portions of the Copyright Act date back to 1976.

In their testimony before the committee, copyright holders argued that strong protection is needed to combat infringement in the digital age, particularly online piracy.

“Our goal in reviewing licensure laws should be to protect creativity and still allow for an active and intelligent marketplace for searching and licensing creative works,” John Lapham, senior vice president and general counsel of Getty Images, testified. “When we do so we can all benefit from content that moves, inspires, provokes, educates, and encourages.”

Representatives from the music and film industries expressed concerns about file sharing and other forms of piracy. “If an environment exists that does not provide adequate copyright protection and blockbuster films become unaffordable and unprofitable due to the threat of piracy, this new and thriving 3-D industry will be significantly hampered and severely impacted,” said William Sherak, Stereo D’s president. “The reason being that 3-D conversions are normally undertaken on major blockbuster films—the very films that are often the greatest targets of piracy.”

At Sheldon Mak & Anderson, we recognize that innovation is your competitive edge – and it needs protection. Recognized as one of the country’s “Best Law Firms” by U.S. News and Best Lawyers, our attorneys possess more than two decades of experience. Our full-service IP firm provides local, regional, national, and international legal services in the following areas: patents, trademarks, copyrights, trade secrets, IP litigation, international patent and trademark prosecution, licensing, alternative dispute resolution, and green technology.