The Extraterritorial Application of the Defend Trade Secrets Act
ALINA VENEZIANO*∙ JULY 14, 2020 ∙ ARTICLE
I. Introduction
The general principle is that a congressional statute applies domestically unless there is an affirmative statement by Congress that demonstrates an intent for that provision to apply extraterritorially. Courts are reluctant to find such congressional intent unless it is explicit. However, for the first time, a U.S. court has held that private civil actions for damages under the Defend Trade Secrets Act (“DTSA”) apply extraterritorially based on U.S. conduct involving misappropriation that occurred overseas.[1]
II. The Defend Trade Secrets Act
Congress passed the Economic Espionage Act (“EEA”) in 1996, which imposes criminal liability for the misappropriation of trade secrets.[2] Section 1837 of the EEA explicitly provides for extraterritorial application if (1) the offender is a U.S. citizen/permanent resident or U.S.-organized corporation, or (2) an act in furtherance of the offense was committed within the United States. [3] In 2016, Congress enacted Section 1836—the DTSA—and supplemented it to the EEA.[4] The DTSA creates a private civil right of action for owners of a trade secret to sue in federal court for the misappropriation of a trade secret used in interstate or foreign commerce.[5]
III. Motorola Solutions v. Hytera Communications Corporation
In this case, Motorola alleged that Hytera misappropriated its trade secrets by hiring three engineers away from Motorola's Malaysian office who then stole thousands of Motorola’s technical and confidential documents.[6] Motorola further alleged that Hytera used those documents to develop a "state-of-the-art digital radio that is functionally indistinguishable from [Motorola's] radios," which Hytera then sold around the world including within the United States.[7] Motorola sued under Section 1836(b) of the DTSA.[8] Hytera argued that the statute does not apply extraterritorially, and that all damages are limited to domestic applications of the statutes.[9] Motorola responded by arguing that Hytera took certain actions relating to the misappropriation in the United States and, therefore, such domestic conduct allows for extraterritorial application.[10]
The district court determined that the DTSA overcomes the presumption against extraterritoriality because Congress clearly intended for the private right of action to apply extraterritorially.[11] It came to this conclusion because Section 1837, which provides for extraterritorial application, refers broadly to “this chapter,” and this includes Chapter 1836.[12] Further, because Congress did not amend the chapter when amendments were made, it was easy to “draw the inference that Congress intended Section 1837 to apply to Section 1836.”[13] Therefore, the DTSA applies extraterritorially if either of the requirements of Section 1837 are satisfied.[14]
The court then had to determine whether the case satisfies the requirements of Section 1837.[15] In determining that extraterritorial application was proper, the court noted that Motorola had presented sufficient evidence to show that Hytera committed an “act in furtherance of” the offense in the United States.[16] Misappropriation, the court articulated, is not limited to the “acquisition” of trade secrets but also includes the “disclosure” or “use” of trade secrets.[17] Here, Hytera had “advertised, promoted, and marketed products embodying the allegedly stolen trade secrets domestically at numerous trade shows.”[18] This constituted “use” under the DTSA even though the misappropriation itself occurred overseas.[19] Therefore, such “use” here by Hytera occurred domestically and supported extraterritorial application.[20]
IV. Conclusion
The Motorola opinion affirmatively establishes the extraterritorial reach of the DTSA. This opinion is a critical step in combating intellectual property theft from China. However, the decision may have substantial consequences. For instance, all private claimants need to show is an alleged misappropriation of a trade secret and conduct occurring in the United States that was in furtherance of the misappropriation. This holding could theoretically permit an extraterritorial claim based on limited or sporadic conduct in the United States. Foreign companies and U.S. companies abroad should be vigilant of their conduct in the United States as a result of this opinion’s authorization of the far-reaching scope of the DTSA.
*Ph.D. Candidate at King’s College London, UK; LL.M., New York University School of Law, 2019; J.D., Georgetown University Law Center, 2018; M.B.A., Western Governors University; B.S., Accounting, Western Governors University. Ms. Veneziano is a member of the Bar of the State of New York.
[1] Motorola Solutions v. Hytera Communs. Corp., 2020 U.S. Dist. LEXIS 35942 (Jan. 31, 2020).
[2] 110 Stat. 3488 (1996).
[3] 18 U.S.C. §1837.
[4] Id. at 1836.
[5] Id. at 1836(b).
[6] Motorola, at *5.
[7] Id.
[8] Id.
[9] Id.
[10] Id. at *5-6.
[11] Id. at *12-13, 18.
[12] Id. at 18.
[13] Id. at 18-19.
[14] Id. at 27.
[15] Id.
[16] Id. at 27-28.
[17] Id. at 28-29.
[18] Id. at 34.
[19] Id.
[20] Id.