JONES DAY PRESENTS®: Cross-Border Trade Secret Litigation in the U.S. Courts
United States trial and appellate courts have interpreted the Defend Trade Secrets Act to have extraterritorial reach. This empowers U.S. district courts to hear civil trade secret cases arising from misappropriation that occurs abroad, provided that certain statutory requirements are met. Jones Day's Randy Kay, who chairs the Firm's global trade secrets team, discusses the first appellate decision to address the DTSA's application to trade secret misappropriation occurring abroad. He also explores the broad spectrum of damages that may be recoverable in cross-border trade secret disputes.
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Randy Kay:
We're guided by the Motorola vs. Hytera appellate decision from the Seventh Circuit in this area on cross-border trade secret litigation. This is the first case to reach the appellate court in the federal system on the ability to bring action in the US District Court for misappropriation occurring abroad.
Now, in the Motorola case, it began when Hytera recruited three engineers from Motorola in Malaysia and encouraged them to bring Motorola trade secrets to China. And it was alleged that these engineers brought more than 10,000 electronic files, including source code, to Hytera from Motorola. Motorola sued in the Northern District of Illinois, and years later won a jury verdict of more than $400 million having established trade secret misappropriation. 135 million of those damages were compensatory. The remainder were exemplary or punitive damages.
Now, the Seventh Circuit affirmed the jury verdict and made three important findings that matter in this space. First, the Seventh Circuit affirmed the determination that the act in furtherance law does apply to a Civil Defend Trade Secrets Act claim. What that means is that you can bring an action in Federal District Court for trade secret misappropriation for misappropriation occurring abroad if an act in furtherance of that conduct occurred in the US. And the Seventh Circuit determined that that does apply to the Civil Defend Trade Secrets Act. It does not apply only to the criminal version, the Economic Espionage Act. So first, we have confirmation from the First Appellate Court that the act in furtherance law applies to the civil DTSA claims.
Secondly, and importantly, the Seventh Circuit affirmed that the acts in furtherance alleged in that case, which were the presence at trade show in the US and sales of product made using the allegedly stolen trade secrets qualify as those acts in furtherance.
And then third, the Seventh Circuit affirmed that worldwide damages can be claimed in a DTSA claim based upon misappropriation occurring abroad. And Motorola claimed and won damages based upon worldwide misconduct, and the Seventh Circuit affirmed that those damages are allowable.
Damages in a trade secret case in federal court come in three forms. First, actual losses such as lost profits. Second, unjust enrichment, such as cost of the R&D that was stolen or other formulas for unjust enrichment. And third, alternatively, the federal courts allow a royalty on sales made using the stolen trade secrets.
So Hytera sought Supreme Court review of the Seventh Circuit's decision, but that was denied. The matter continues now back in the district court on contempt proceedings and other enforcement of judgment matters.
