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113th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     113-657

======================================================================



 
                  TRADE SECRETS PROTECTION ACT OF 2014

                                _______
                                

 December 11, 2014.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

   Mr. Goodlatte, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                        [To accompany H.R. 5233]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 5233) to amend chapter 90 of title 18, United States 
Code, to provide Federal jurisdiction for the theft of trade 
secrets, and for other purposes, having considered the same, 
reports favorably thereon with an amendment and recommends that 
the bill as amended do pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     1
Purpose and Summary..............................................     5
Background and Need for the Legislation..........................     5
Hearings.........................................................     7
Committee Consideration..........................................     8
Committee Votes..................................................     8
Committee Oversight Findings.....................................     8
New Budget Authority and Tax Expenditures........................     8
Congressional Budget Office Cost Estimate........................     8
Duplication of Federal Programs..................................     9
Disclosure of Directed Rule Makings..............................     9
Performance Goals and Objectives.................................     9
Advisory on Earmarks.............................................     9
Section-by-Section Analysis......................................    10
Changes in Existing Law Made by the Bill, as Reported............    14

                             The Amendment

    The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Trade Secrets Protection Act of 
2014''.

SEC. 2. FEDERAL JURISDICTION FOR THEFT OF TRADE SECRETS.

  (a) In General.--Section 1836 of title 18, United States Code, is 
amended by striking subsection (b) and inserting the following:
  ``(b) Private Civil Actions.--
          ``(1) In general.--An owner of a trade secret may bring a 
        civil action under this subsection if the person is aggrieved 
        by a misappropriation of a trade secret that is related to a 
        product or service used in, or intended for use in, interstate 
        or foreign commerce.
          ``(2) Civil seizure.--
                  ``(A) In general.--
                          ``(i) Application.--Based on an affidavit or 
                        verified complaint satisfying the requirements 
                        of this paragraph, the court may, upon ex parte 
                        application, issue an order providing for the 
                        seizure of property necessary to preserve 
                        evidence in a civil action brought under 
                        paragraph (1) or to prevent the propagation or 
                        dissemination of the trade secret that is the 
                        subject of the action.
                          ``(ii) Requirements for issuing order.--The 
                        court may not grant an application under clause 
                        (i) unless the court finds that it clearly 
                        appears from specific facts that--
                                  ``(I) an order issued pursuant to 
                                Rule 65(b) of the Federal Rules of 
                                Civil Procedure would be inadequate to 
                                achieve the purpose of this paragraph 
                                because the party to which the order 
                                would be issued would evade, avoid, or 
                                otherwise not comply with such an 
                                order;
                                  ``(II) an immediate and irreparable 
                                injury will occur if such seizure is 
                                not ordered;
                                  ``(III) the harm to the applicant of 
                                denying the application outweighs the 
                                harm to the legitimate interests of the 
                                person against whom seizure would be 
                                ordered of granting the application and 
                                substantially outweighs the harm to any 
                                third parties who may be harmed by such 
                                seizure;
                                  ``(IV) the applicant is likely to 
                                succeed in showing that the person 
                                against whom seizure would be ordered 
                                misappropriated the trade secret by 
                                improper means, or conspired to use 
                                improper means to misappropriate the 
                                trade secret, and is in possession of 
                                the trade secret;
                                  ``(V) the application describes with 
                                reasonable particularity the matter to 
                                be seized and, to the extent reasonable 
                                under the circumstances, identifies the 
                                location where the matter is to be 
                                seized;
                                  ``(VI) the person against whom 
                                seizure would be ordered, or persons 
                                acting in concert with such person, 
                                would destroy, move, hide, or otherwise 
                                make such matter inaccessible to the 
                                court, if the applicant were to proceed 
                                on notice to such person; and
                                  ``(VII) the applicant has not 
                                publicized the requested seizure.
                  ``(B) Elements of order.--If an order is issued under 
                subparagraph (A), it shall--
                          ``(i) set forth findings of fact and 
                        conclusions of law required for the order;
                          ``(ii) provide for the seizure of any 
                        property in a manner that minimizes any 
                        interruption of the business operations of 
                        third parties and, to the extent possible, does 
                        not interrupt those legitimate business 
                        operations of the person accused of 
                        misappropriating the trade secret that are 
                        unrelated to the trade secret that has 
                        allegedly been misappropriated;
                          ``(iii) be accompanied by an order protecting 
                        the property from disclosure by restricting the 
                        access of the applicant, including during the 
                        seizure, and prohibiting any copies, in whole 
                        or in part, of the seized property, to prevent 
                        undue damage to the party against whom the 
                        order has issued or others, until such parties 
                        have an opportunity to be heard in court;
                          ``(iv) set a date for a hearing at the 
                        earliest possible time, and not later than 7 
                        days after the order has issued, unless the 
                        party against whom the order is directed and 
                        others harmed by the order consent to another 
                        date for such hearing, except that a party 
                        against whom the order has issued or any person 
                        harmed by the order may move the court at any 
                        time to dissolve or modify the order after 
                        giving notice to the applicant who obtained the 
                        order; and
                          ``(v) require the person obtaining the order 
                        to provide the security determined adequate by 
                        the court for the payment of such damages as 
                        any person may be entitled to recover as a 
                        result of a wrongful or excessive seizure or 
                        wrongful or excessive attempted seizure under 
                        this paragraph.
                  ``(C) Protection from publicity.--The court shall 
                take appropriate action to protect the person against 
                whom an order under this paragraph is directed from 
                publicity, by or at the behest of the person obtaining 
                the order, about such order and any seizure under such 
                order.
                  ``(D) Materials in custody of court.--Any materials 
                seized under this paragraph shall be taken into the 
                custody of the court. The court shall secure the seized 
                material from physical and electronic access during the 
                seizure and while in the custody of the court.
                  ``(E) Service of order.--The court shall order that 
                service of a copy of the order under this paragraph 
                shall be made by a Federal law enforcement officer, or 
                may be made by a State or local law enforcement 
                officer, who, upon making service, shall carry out the 
                seizure under the order.
                  ``(F) Action for damage caused by wrongful seizure.--
                A person who suffers damage by reason of a wrongful or 
                excessive seizure under this paragraph has a cause of 
                action against the applicant for the order under which 
                such seizure was made, and shall be entitled to the 
                same relief as is provided under section 34(d)(11) of 
                the Trademark Act of 1946 (15 U.S.C. 1116(d)(11)). The 
                security posted with the court under subparagraph 
                (B)(v) shall not limit the recovery of third parties 
                for damages.
          ``(3) Remedies.--In a civil action brought under this 
        subsection with respect to the misappropriation of a trade 
        secret, a court may--
                  ``(A) grant an injunction--
                          ``(i) to prevent any actual or threatened 
                        misappropriation described in paragraph (1) on 
                        such terms as the court deems reasonable;
                          ``(ii) if determined appropriate by the 
                        court, requiring affirmative actions to be 
                        taken to protect the trade secret; and
                          ``(iii) in exceptional circumstances that 
                        render an injunction inequitable, that 
                        conditions future use of the trade secret upon 
                        payment of a reasonable royalty for no longer 
                        than the period of time for which such use 
                        could have been prohibited;
                  ``(B) award--
                          ``(i)(I) damages for actual loss caused by 
                        the misappropriation of the trade secret; and
                          ``(II) damages for any unjust enrichment 
                        caused by the misappropriation of the trade 
                        secret that is not addressed in computing 
                        damages for actual loss; or
                          ``(ii) in lieu of damages measured by any 
                        other methods, the damages caused by the 
                        misappropriation measured by imposition of 
                        liability for a reasonable royalty for the 
                        misappropriator's unauthorized disclosure or 
                        use of the trade secret;
                  ``(C) if the trade secret is willfully and 
                maliciously misappropriated, award exemplary damages in 
                an amount not more than 3 times the amount of the 
                damages awarded under subparagraph (B); and
                  ``(D) if a claim of the misappropriation is made in 
                bad faith, a motion to terminate an injunction is made 
                or opposed in bad faith, or the trade secret was 
                willfully and maliciously misappropriated, award 
                reasonable attorney's fees to the prevailing party.
  ``(c) Jurisdiction.--The district courts of the United States shall 
have original jurisdiction of civil actions brought under this section.
  ``(d) Period of Limitations.--A civil action under subsection (b) may 
not be commenced later than 5 years after the date on which the 
misappropriation with respect to which the action would relate is 
discovered or by the exercise of reasonable diligence should have been 
discovered. For purposes of this subsection, a continuing 
misappropriation constitutes a single claim of misappropriation.''.
  (b) Definitions.--Section 1839 of title 18, United States Code, is 
amended--
          (1) in paragraph (3), by striking ``and'' at the end;
          (2) in paragraph (4), by striking the period at the end and 
        inserting a semicolon; and
          (3) by adding at the end the following:
          ``(5) the term `misappropriation' means--
                  ``(A) acquisition of a trade secret of another by a 
                person who knows or has reason to know that the trade 
                secret was acquired by improper means; or
                  ``(B) disclosure or use of a trade secret of another 
                without express or implied consent by a person who--
                          ``(i) used improper means to acquire 
                        knowledge of the trade secret;
                          ``(ii) at the time of disclosure or use, knew 
                        or had reason to know that the knowledge of the 
                        trade secret was--
                                  ``(I) derived from or through a 
                                person who had used improper means to 
                                acquire the trade secret;
                                  ``(II) acquired under circumstances 
                                giving rise to a duty to maintain the 
                                secrecy of the trade secret or limit 
                                the use of the trade secret; or
                                  ``(III) derived from or through a 
                                person who owed a duty to the person 
                                seeking relief to maintain the secrecy 
                                of the trade secret or limit the use of 
                                the trade secret; or
                          ``(iii) before a material change of the 
                        position of the person, knew or had reason to 
                        know that--
                                  ``(I) the trade secret was a trade 
                                secret; and
                                  ``(II) knowledge of the trade secret 
                                had been acquired by accident or 
                                mistake;
          ``(6) the term `improper means'--
                  ``(A) includes theft, bribery, misrepresentation, 
                breach or inducement of a breach of a duty to maintain 
                secrecy, or espionage through electronic or other 
                means; and
                  ``(B) does not include reverse engineering or 
                independent derivation; and
          ``(7) the term `Trademark Act of 1946' means the Act entitled 
        `An Act to provide for the registration and protection of 
        trademarks used in commerce, to carry out the provisions of 
        certain international conventions, and for other purposes, 
        approved July 5, 1946 (15 U.S.C. 1051 et seq.) (commonly 
        referred to as the ``Trademark Act of 1946'' or the ``Lanham 
        Act'')'.''.
  (c) Exceptions to Prohibition.--Section 1833 of title 18, United 
States Code, is amended, in the matter preceding paragraph (1), by 
inserting ``or create a private right of action for'' after 
``prohibit''.
  (d) Conforming Amendments.--
          (1) The section heading for section 1836 of title 18, United 
        States Code, is amended to read as follows:

``Sec. 1836. Civil proceedings''.

          (2) The table of sections for chapter 90 of title 18, United 
        States Code, is amended by striking the item relating to 
        section 1836 and inserting the following:

``1836. Civil proceedings.''.

  (e) Effective Date.--The amendments made by this section shall apply 
with respect to any misappropriation of a trade secret (as defined in 
section 1839 of title 18, United States Code, as amended by this 
section) for which any act occurs on or after the date of the enactment 
of this Act.
  (f) Rule of Construction.--Nothing in the amendments made by this 
section shall be construed to modify the rule of construction under 
section 1838 of title 18, United States Code, or to preempt any other 
provision of law.
  (g) Applicability to Other Laws.--This section and the amendments 
made by this section shall not be construed to be a law pertaining to 
intellectual property for purposes of any other Act of Congress.

SEC. 3. REPORT ON THEFT OF TRADE SECRETS OCCURRING ABROAD.

  (a) Reports.--Not later than 1 year after the date of the enactment 
of this Act, and biannually thereafter, the Attorney General, in 
consultation with the Intellectual Property Enforcement Coordinator, 
the Director, and the heads of other appropriate agencies, shall submit 
to the Committees on the Judiciary of the House of Representatives and 
the Senate, and make publicly available on the Web site of the 
Department of Justice and disseminate to the public through such other 
means as the Attorney General may identify, a report on the following:
          (1) The scope and breadth of the theft of the trade secrets 
        of United States companies occurring outside of the United 
        States.
          (2) The extent to which theft of trade secrets occurring 
        outside of the United States is sponsored by foreign 
        governments, foreign instrumentalities, or foreign agents.
          (3) The threat posed by theft of trade secrets occurring 
        outside of the United States.
          (4) The ability and limitations of trade secret owners to 
        prevent the misappropriation of trade secrets outside of the 
        United States, to enforce any judgment against foreign entities 
        for theft of trade secrets, and to prevent imports based on 
        theft of trade secrets overseas.
          (5) A breakdown of the trade secret protections afforded 
        United States companies by each country that is a trading 
        partner of the United States and enforcement efforts available 
        and undertaken in each such country, including a list 
        identifying specific countries where trade secret theft, laws, 
        or enforcement is a significant problem for United States 
        companies.
          (6) Instances of the Federal Government working with foreign 
        countries to investigate, arrest, and prosecute entities and 
        individuals involved in the theft of trade secrets outside of 
        the United States.
          (7) Specific progress made under trade agreements and 
        treaties, including any new remedies enacted by foreign 
        countries, to protect against theft of trade secrets of United 
        States companies outside of the United States.
          (8) Recommendations of legislative and executive branch 
        actions that may be undertaken to--
                  (A) reduce the threat of and economic impact caused 
                by the theft of the trade secrets of United States 
                companies occurring outside of the United States;
                  (B) educate United States companies regarding the 
                threats to their trade secrets when taken outside of 
                the United States;
                  (C) provide assistance to United States companies to 
                reduce the risk of loss of their trade secrets when 
                taken outside of the United States; and
                  (D) provide a mechanism for United States companies 
                to confidentially or anonymously report the theft of 
                trade secrets occurring outside of the United States.
  (b) Definitions.--In this section:
          (1) Director.--The term ``Director'' means the Under 
        Secretary of Commerce for Intellectual Property and Director of 
        the United States Patent and Trademark Office.
          (2) Foreign instrumentality, etc.--The terms ``foreign 
        instrumentality'', ``foreign agent'', and ``trade secret'' have 
        the meanings given those terms in section 1839 of title 18, 
        United States Code.
          (3) State.--The term ``State'' includes the District of 
        Columbia and any commonwealth, territory, or possession of the 
        United States.
          (4) United states company.--The term ``United States 
        company'' means an organization organized under the laws of the 
        United States or a State or political subdivision thereof.

                          Purpose and Summary

    H.R. 5233 amends the Economic Espionage Act of 1996 to 
provide a Federal civil remedy for the misappropriation of 
trade secrets, allowing trade secret owners to protect their 
innovations by seeking redress in Federal court, just as owners 
of other forms of intellectual property, including copyrights, 
patents, and trademarks, can seek remedies in Federal court for 
violations of their rights. The bill provides for equitable 
remedies and the award of damages for the misappropriation of a 
trade secret, and models its definition of ``misappropriation'' 
on the Uniform Trade Secrets Act. It also provides for 
expedited relief on an ex parte basis in the form of seizure of 
property from the party accused of misappropriation only if 
necessary to preserve evidence or prevent the dissemination of 
a trade secret. Any ex parte seizure order issued by a court 
must minimize any interruption to the business operations of 
third parties, protect the property seized from disclosure, and 
set a hearing date at the earliest possible time. The bill also 
provides sanctions for an erroneous seizure.

                Background and Need for the Legislation

    Trade secrets are the commercially valuable designs, 
processes, techniques and other forms of information kept 
confidential by companies because, by virtue of their secrecy, 
they give companies an edge in a competitive marketplace. Often 
developed at great cost and through years of research and 
development, trade secrets include manufacturing processes, 
proprietary technologies, industrial techniques, formulas, 
codes, designs, and customer lists. In a global economy based 
on knowledge and innovation, trade secrets constitute some of 
any company's most valuable property.
    The trade secrets of American companies are increasingly at 
risk for misappropriation by thieves looking for a quick payday 
or to replicate the market-leading innovations developed by 
trade secret owners. Using ever-more sophisticated means of 
attack, these thieves aim to steal the know-how that has made 
American industry the envy of the world. The Commission on the 
Theft of American Intellectual Property found that the illegal 
theft of intellectual property is undermining the means and 
incentive for entrepreneurs to innovate, slowing the 
development of new inventions and industries that could raise 
the prosperity and quality of life for everyone.\1\
---------------------------------------------------------------------------
    \1\Report of the Commission of the Theft of American Intellectual 
Property, at 1, 10 (May 2013), available at http://
www.ipcommission.org/report/IP_Commission_Report_052213.pdf.
---------------------------------------------------------------------------
    The threat is significant: Trade secrets are an integral 
part of a company's competitive advantage in today's economy, 
and with the increased digitization of critical data and 
increased global trade, this information is highly susceptible 
to theft.\2\ The United States Department of Defense has found 
that every year, ``an amount of intellectual property larger 
than that contained in the Library of Congress is stolen from 
networks maintained by U.S. businesses, universities, and 
government departments and agencies.''\3\ General Keith 
Alexander, former head of the National Security Agency and U.S. 
Cyber Command, estimated that U.S. companies lose $250 billion 
per year due to the theft of their intellectual property.\4\ 
More recently, the Center for Responsible Enterprise and Trade, 
along with PwC, issued a report estimating that trade secret 
theft exacts a cost on U.S. companies of between one and 3 
percent of GDP annually, roughly a cost of between $160 and 
$480 million each year.\5\ And in the last Congress, this 
Committee recognized the ``significant and growing threat 
presented by criminals who engage in espionage on behalf of 
foreign adversaries and competitors.''\6\
---------------------------------------------------------------------------
    \2\See Trade Secrets: Promoting and Protecting American Innovation, 
Competitiveness and Market Access in Foreign Markets: Hearing Before 
the Subcomm. on Courts, Intellectual Property, and the Internet of the 
H. Comm. on the Judiciary, 113th Cong (2014), Statement of Richard 
Hertling, Of Counsel, Covington & Burling LLP, at 12; see also id., 
Statement of David M. Simon, Senior Vice President for Intellectual 
Property, salesforce.com, Inc., at 24-25; Statement of Thaddeus Burns, 
Senior Counsel, Intellectual Property & Trade, General Electric, on 
behalf of Intellectual Property Owners Association, at 36; Statement of 
Chris Moore, Senior Director, International Business Policy, National 
Association of Manufacturers, at 47.
    \3\Dep't of Defense, Strategy for Operating in Cyberspace, at 4 
(July 2011), available at http://www.defense.gov/news/
d20110714cyber.pdf.
    \4\Josh Rogin, NSA Chief: Cybercrime Constitutes the ``Greatest 
Transfer of Wealth in History,'' The Cable, July 9, 2012, available at 
http://thecable.foreignpolicy.com/posts/2012/07/09/
nsa_chief_cybercrime_constitutes_the_greatest_transfer_of_wealth_in_hist
ory.
    \5\Center for Responsible Enterprise and Trade & PwC, Economic 
Impact of Trade Secret Theft: a Framework for Companies to Safeguard 
Trade Secrets and Mitigate Potential Threats, at 7-9 (February 2014), 
available at https://create.org/wp-content/uploads/2-14/07/CREATe.org-
PwC-Trade-Secret-Theft-FINAL-Feb-2014_01.pdf.
    \6\H.R. Rep. No. 112-610, Foreign and Economic Espionage Penalty 
Enhancement Act of 2012, at 1 (2012).
---------------------------------------------------------------------------
    Companies have taken a number of measures to combat this 
threat, including strengthening their cybersecurity measures, 
encrypting key documents, examining their supply chains for 
weak points, employing strong contractual protections to 
safeguard their trade secrets in business relationships, and 
increasing the physical security of their plants and offices. 
When thefts do occur, companies turn to either state civil 
laws, which vary by jurisdiction, or the Federal Economic 
Espionage Act (``EEA'').\7\
---------------------------------------------------------------------------
    \7\Economic Espionage Act of 1996, Pub. L. No. 104-294, 110 Stat. 
3488 (1996).
---------------------------------------------------------------------------
    The EEA, enacted in 1996 and codified at 18 U.S.C. 
Sec. Sec. 1831 et seq., makes it a Federal criminal offense to 
misappropriate a trade secret that has an interstate or foreign 
nexus. This Committee's Report on the EEA found that trade 
secrets form ``an integral part of America's economic well-
being.''\8\ As the first Federal statute to protect trade 
secrets, the EEA has enabled the FBI to investigate cases of 
trade secret theft, including, for example, the case of a 
former engineer at Ford Motor Co. who stole 4,000 documents and 
went to work at a competitor, causing losses to Ford estimated 
at $50 million. However, the FBI does not have the resources to 
investigate every case of trade secret theft. And the EEA, as a 
criminal statute, is not suited to making whole the victims of 
misappropriation.
---------------------------------------------------------------------------
    \8\H.R. Rep. No. 104-788, Economic Espionage Act of 1996, at 4 
(1996)
---------------------------------------------------------------------------
    Companies facing a trade secret theft also turn to state 
trade secret laws, many of them based on the Uniform Trade 
Secrets Act (``UTSA''). While 48 states have adopted variations 
of the UTSA, the state laws vary in a number of ways and 
contain built-in limitations that make them not wholly 
effective in a national and global economy. First, they require 
companies to tailor costly compliance plans to meet each 
individual state's law. Second, trade secret theft today is 
often not confined to a single state. The theft increasingly 
involves the movement of secrets across state lines, making it 
difficult for state courts to efficiently order discovery and 
service of process. Finally, trade secret cases often require 
swift action by courts across state lines to preserve evidence 
and keep a trade secret thief from boarding a plane and taking 
the secret beyond the reach of American law. In a globalized 
and national economy, Federal courts are better situated to 
address these concerns.
    America's strength has always been found in the innovation 
and ingenuity of its people--its inventors, creators, 
engineers, designers, developers, and doers. American 
businesses that compete globally will lose their competitive 
edge if they cannot quickly pursue and stop thieves looking to 
shortcut the innovative products, designs, and processes that 
have fueled our economy. This bill will equip companies with 
the additional tools they need to protect their proprietary 
information, to preserve and increase jobs and promote growth 
in the United States, and to continue to lead the world in 
creating new and innovative products, technologies, and 
services.

                                Hearings

    The Committee held an oversight hearing on ``Trade Secrets: 
Promoting and Protecting American Innovation, Competitiveness 
and Market Access in Foreign Markets'' on June 24, 2014. The 
Committee heard testimony from Mr. Thaddeus Burns, Senior 
Counsel, Intellectual Property & Trade, General Electric; Mr. 
Richard A. Hertling, Of Counsel, Covington & Burling LLP, on 
behalf of the Protect Trade Secrets Coalition; Mr. Christopher 
Moore, Senior Director, International Business Policy, National 
Association of Manufacturers; and Mr. David Simon, Senior Vice 
President, Intellectual Property, Salesforce.com.

                        Committee Consideration

    On September 17, 2014, the Committee met in open session 
and ordered the bill H.R. 5233 favorably reported with an 
amendment, by voice vote, a quorum being present.

                            Committee Votes

    In compliance with clause 3(b) of rule XIII of the Rules of 
the House of Representatives, the Committee advises that there 
were no recorded votes during the Committee's consideration of 
H.R. 5233.

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee advises that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of rule XIII of the Rules of the House of 
Representatives is inapplicable because this legislation does 
not provide new budgetary authority or increased tax 
expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 5233, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                 Washington, DC, November 25, 2014.
Hon. Bob Goodlatte, Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 5233, the ``Trade 
Secrets Protection Act of 2014.''
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Martin von 
Gnechten, who can be reached at 226-2860.
            Sincerely,
                                      Douglas W. Elmendorf,
                                                  Director.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member



            H.R. 5233--Trade Secrets Protection Act of 2014.

      As ordered reported by the House Committee on the Judiciary 
                         on September 17, 2014.




    H.R. 5233 would establish a Federal remedy for individuals 
seeking relief from the misappropriation of trade secrets. 
Under the bill, an owner of a trade secret could file a civil 
action in a district court, and the court may issue an order to 
seize any property necessary to preserve evidence for the civil 
action. The legislation would require the Department of Justice 
(DOJ) to submit periodic reports on theft of trade secrets in 
the United States.
    Based on information provided by the DOJ and the 
Administrative Office of the U.S. Courts, CBO estimates that 
implementing H.R. 5233 would have no significant effect on the 
Federal budget. Enacting H.R. 5233 would affect direct spending 
and revenues; therefore, pay-as-you-go procedures apply. 
Specifically, the bill would affect civil court filing fees, 
which are recorded in the budget as revenues. A portion of 
those revenues would be spent without further appropriation. 
However, CBO estimates that the net budget effect would be 
insignificant for each year and over the 2015-2024 period.
    H.R. 5233 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act and 
would not affect the budgets of state, local, or tribal 
governments.
    The CBO staff contact for this estimate is Martin von 
Gnechten. The estimate was approved by Theresa Gullo, Deputy 
Assistant Director for Budget Analysis.

                    Duplication of Federal Programs

    No provision of H.R. 5233 establishes or reauthorizes a 
program of the Federal Government known to be duplicative of 
another Federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                  Disclosure of Directed Rule Makings

    The Committee estimates that H.R. 5233 specifically directs 
to be completed no specific rule makings within the meaning of 
5 U.S.C. 551.

                    Performance Goals and Objectives

    The Committee states that pursuant to clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, H.R. 
5233 will provide for civil jurisdiction in Federal court for 
the misappropriation of a trade secret, providing companies 
with an essential tool to prevent the disclosure of their 
valuable trade secrets and to obtain equitable remedies and 
damages in the event of trade secret theft.

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 5233 does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(e), 9(f), or 9(g) of Rule XXI.

                      Section-by-Section Analysis

    The following discussion describes the bill as reported by 
the Committee.
Section 1. Short Title.
    Section 1 provides that the short title of H.R. 5233 is the 
``Trade Secrets Protection Act of 2014.''
Sec. 2. Federal Jurisdiction for Theft of Trade Secrets.
    Section 2(a) amends Sec. 1836 of title 18 by striking 
subsection (b) (which provides for Federal district courts to 
have exclusive jurisdiction over civil actions brought by the 
Attorney General for trade secret misappropriation) and 
creating a Federal civil remedy for trade secret 
misappropriation.
In General.
    The new Sec. 1836(b) in paragraph (1) authorizes a trade 
secret owner to bring a civil action for the misappropriation 
of a trade secret that is related to a product or service used 
in, or intended for use in, interstate or foreign commerce. The 
jurisdictional interstate or foreign commerce language is 
identical to the existing language required for Federal 
jurisdiction over a crime involving the theft of a trade secret 
under Sec. 1832(a).
Civil Seizure.
    The new Sec. 1836(b) in paragraph (2) authorizes a court to 
issue an order, and upon an ex parte application based on an 
affidavit or verified complaint, for seizure of property 
necessary to preserve evidence or to prevent the propagation or 
dissemination of the trade secret. Subparagraph (A) contains 
numerous limitations, described below, and is not intended to 
affect the inherent authority of the Federal courts. It also 
does not affect the authority of the court to issue appropriate 
orders pursuant to Rule 65 of the Federal Rules of Civil 
Procedure.
    In clause (ii) of paragraph (2), the legislation instructs 
that the court may not grant a seizure order unless it finds 
that it clearly appears from specific facts that (I) a 
temporary restraining order issued pursuant to Federal Rule of 
Civil Procedure 65(b) would be inadequate because the party to 
which the order would be issued would evade, avoid, or 
otherwise not comply; (II) immediate and irreparable injury 
will occur if the seizure is not ordered; (III) the harm to the 
applicant of denying the application outweighs the harm to the 
legitimate interests of the person against whom the seizure is 
ordered and substantially outweighs the harm to any third 
parties; (IV) the applicant is likely to succeed in showing 
that the person against whom the seizure is ordered 
misappropriated the trade secret by improper means, or 
conspired to use improper means, and is in possession of it; 
(V) the applicant describes with reasonable particularity the 
matter to be seized and, to the extent reasonable, identifies 
the location where the matter is to be seized; (VI) the person 
against whom the seizure would be ordered, or those working in 
concert with that person, would destroy, move, hide, or 
otherwise make such matter inaccessible if the applicant were 
to provide that person notice; and (VII) the applicant has not 
publicized the requested seizure.
    The Committee expects that courts will require applicants 
for ex parte seizure orders to describe the trade secret that 
would be the subject of the order with sufficient particularity 
for the court to evaluate the request. The requirement in 
subclause (IV) protects third-parties from seizure. For 
instance, the operator of a server on which another party has 
stored a misappropriated trade secret, or online an 
intermediary such as an Internet service provider, would not be 
subject to seizure because that party did not misappropriate 
the trade secret. The court may decide to issue an injunction 
preventing disclosure of the trade secret, but not a seizure 
order under this provision. The requirement in that subclause 
relating to improper means is intended to prevent the seizure 
provision from being used against a party who may know it is in 
possession of a trade secret that was misappropriated, but did 
not use or conspire to use improper means to acquire it. The 
subclause is flexible enough, however, to allow seizure of a 
trade secret stolen by one party and handed off to an 
accomplice.
    Subparagraph (B) of new Sec. 1836(b)(2) further provides 
that a seizure order shall (i) set forth findings of fact and 
conclusions of law required for the order; (ii) provide for the 
seizure in a manner that minimizes any interruption of the 
business operations of third parties and, to the extent 
possible, does not interrupt the legitimate, unrelated business 
operations of the person accused of misappropriating the trade 
secret; (iii) be accompanied by an order protecting the seized 
property from disclosure by restricting the access of the 
applicant and prohibiting any copies of the seized property; 
(iv) set a date for a hearing at the earliest possible time, 
and no later than 7 days after the order has issued; and (v) 
require the person obtaining the order to provide the security 
determined adequate by the court for payment of such damages as 
a person may be entitled to recover as a result of a wrongful 
or excessive seizure.
    Subparagraph (C) of new Sec. 1836(b)(2) requires a court, 
in issuing a seizure order, to take appropriate action to 
protect the target of the order from publicity about the order 
and seizure. Subparagraph (D) provides that any materials 
seized shall be taken into the custody of the court, which 
shall secure the material from physical and electronic access. 
The court, in implementing this subparagraph, should be careful 
to keep, for instance, any electronic data secure and not 
connected to a device that may be connected to the Internet and 
therefore susceptible to cyberattacks. Subparagraph (E) 
requires the order to be carried out by a law enforcement 
officer. Subparagraph (F) provides that a person who suffers 
damage by reason of a wrongful or excessive seizure has a cause 
of action against the applicant to recover damages, including 
punitive damages, and a reasonable attorney's fee.
Remedies.
    Paragraph (3) of new Sec. 1836(b) provides the remedies for 
the misappropriation of a trade secret. Subparagraph (A) 
specifies the equitable relief available and comes directly 
from Sec. 2 of the UTSA. A court may grant an injunction to 
prevent any actual or threatened misappropriation. A court may 
require affirmative actions to be taken to protect the trade 
secret. And, in exceptional circumstances that render an 
injunction inequitable, a court may condition future use of the 
trade secret upon payment of reasonable royalties.
    Subparagraph (B) specifies the damage award that a court 
may issue and comes directly from Sec. 3 of the UTSA. This 
subparagraph authorizes an award of damages for the actual loss 
and any unjust enrichment caused by the misappropriation, or, 
in lieu of damages calculated by any other method, an award of 
a reasonable royalty.
    Subparagraph (C) authorizes an award of exemplary damages 
if the trade secret is willfully and maliciously 
misappropriated. This provision is similar to Sec. 3(b) of the 
UTSA, which authorizes an award not exceeding twice the damages 
awarded for willful and malicious misappropriation. The 
Committee included treble damages, rather than double, for 
consistency with the patent laws--section 284 of title 35, in 
the second undesignated paragraph--and the trademark laws--
section 35(b) of the Lanham Act--both of which authorize treble 
damages for willful infringement.
    Subparagraph (D) authorizes an award of attorney's fees to 
the prevailing party if a claim of misappropriation is made in 
bad faith, there is willful and malicious infringement, or a 
motion to terminate an injunction is made or opposed in bad 
faith. This provision comes directly from Sec. 4 of the UTSA.
Jurisdiction.
    Subsection (c) of new Sec. 1836 is identical to current 
subsection (b), which provides that the district courts of the 
United States shall have original jurisdiction of civil actions 
brought under the section.
Period of Limitations.
    Subsection (d) of new Sec. 1836 provides a 5-year period of 
limitations in which to bring a claim under the section.
Additional Provisions.
    Section 2(b) of the Act amends Sec. 1839 to add three new 
definitions.
    First, the subsection includes a definition of 
``misappropriation'' that is identical in all relevant respects 
to the definition of misappropriation in Sec. 1(2) of the UTSA. 
The Committee intentionally used this established definition to 
make clear the Committee is not intending to alter the balance 
of current trade secret law or alter specific court 
decisions.\9\
---------------------------------------------------------------------------
    \9\The Committee is cognizant, for instance, that courts 
interpreting state trade secret laws have reached different conclusions 
on the applicability of the inevitable disclosure doctrine. Compare 
PepsiCo, Inc. v. Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995) (``[A] 
plaintiff may prove a claim of trade secret misappropriation by 
demonstrating that [the] defendant's new employment will inevitably 
lead him to rely on the plaintiff's trade secrets''), with Whyte v. 
Schlage Lock Co., 125 Cal. Rptr. 2d 277, 281 (Ct. App. 2002) (rejecting 
explicitly the inevitable disclosure doctrine under California law). 
The Committee does not intend this legislation to affect the 
development of this doctrine.
---------------------------------------------------------------------------
    Second, the subsection includes a definition of ``improper 
means.'' This definition in subparagraph (A) is identical to 
the definition in the Sec. 1(1) of the UTSA. The Committee 
included a subparagraph (B) to clarify that reverse engineering 
and independent derivation of the secret do not constitute 
improper means.
    Third, the subsection defines ``Trademark Act of 1946'', 
which provides the basis for recovery by a person harmed by a 
wrongful or excessive seizure.
    Section 2(c) of the Act ensures that nothing in the 
legislation is read to create a cause of action for conduct of 
a governmental entity or for reporting a suspected violation of 
law to a governmental entity.
    Section 2(d) of the Act is a conforming amendment to update 
the title of section 1836 in the section heading and table of 
sections based on the changes made by this Act.
    Section 2(e) of the Act sets the effective date for the 
amendments made by section 2 of the Act. The amendments shall 
apply to any misappropriation for which any act occurs on or 
after the date of enactment of the Act.
    Section 2(f) of the Act clarifies that nothing in this Act 
modifies the rule of construction in Sec. 1838 and, therefore, 
state trade secret law is not preempted and nothing affects an 
otherwise lawful disclosure under the Freedom of Information 
Act.
    Section 2(g) of the Act also specifies that the new civil 
remedy created by this Act will not be an additional exception 
to protections provided to certain online services. This 
section has no impact on whether pre-existing law related to 
trade secrets at the state or Federal level are laws pertaining 
to intellectual property and therefore exceptions to those 
protections.
Sec. 3. Report on Theft of Trade Secrets Occurring Abroad.
    Section 3 of the Act requires a biannual report by the 
Attorney General, in consultation with the Intellectual 
Property Enforcement Coordinator, the Director of the United 
States Patent and Trademark Office, and the heads of other 
appropriate agencies, on:
    (1) the scope of trade secret theft from United States 
companies that occurs outside the United States;
    (2) the extent to which trade secret theft outside of the 
United States is sponsored by foreign entities;
    (3) the threat posed by trade secret theft outside the 
United States;
    (4) the ability and limitations of trade secret owners to 
prevent trade secret misappropriation outside of the United 
States, to enforce judgment against foreign entities for such 
theft, and to prevent imports based on theft of trade secrets 
overseas;
    (5) the trade secret protections afforded United States 
companies by trading partners of the United States and specific 
information about enforcement efforts available and undertaken 
in each such country;
    (6) instances of the Federal Government working with 
foreign countries to investigate, arrest, and prosecute 
entities and individuals involved in the theft of trade secrets 
outside of the United States;
    (7) specific progress made under trade agreements and 
treaties to protect United States companies from trade secret 
theft outside the United States; and
    (8) recommendations of legislative and executive branch 
actions that may be undertaken to (A) reduce the threat of and 
economic impact caused by the theft of the trade secrets of 
United States companies occurring outside of the United States; 
(B) educate United States companies regarding threats to their 
trade secrets when taken outside of the United States; (C) 
provide assistance to United States companies to reduce the 
risk of loss of their trade secrets when taken outside of the 
United States; and (D) provide a mechanism for United States 
companies to confidentially or anonymously report the theft of 
trade secrets occurring outside the United States.

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

                      TITLE 18, UNITED STATES CODE



           *       *       *       *       *       *       *
PART I--CRIMES

           *       *       *       *       *       *       *


                CHAPTER 90--PROTECTION OF TRADE SECRETS

Sec.
1831. Economic espionage.
     * * * * * * *
[1836. Civil proceedings to enjoin violations.]
1836. Civil proceedings.

           *       *       *       *       *       *       *


Sec. 1833. Exceptions to prohibitions

     This chapter does not prohibit or create a private right 
of action for--
            (1) * * *

           *       *       *       *       *       *       *


Sec. 1836. [Civil proceedings to enjoin violations]  Civil proceedings

    (a) * * *
    [(b) The district courts of the United States shall have 
exclusive original jurisdiction of civil actions under this 
section.]
    (b) Private Civil Actions.--
            (1) In general.--An owner of a trade secret may 
        bring a civil action under this subsection if the 
        person is aggrieved by a misappropriation of a trade 
        secret that is related to a product or service used in, 
        or intended for use in, interstate or foreign commerce.
            (2) Civil seizure.--
                    (A) In general.--
                            (i) Application.--Based on an 
                        affidavit or verified complaint 
                        satisfying the requirements of this 
                        paragraph, the court may, upon ex parte 
                        application, issue an order providing 
                        for the seizure of property necessary 
                        to preserve evidence in a civil action 
                        brought under paragraph (1) or to 
                        prevent the propagation or 
                        dissemination of the trade secret that 
                        is the subject of the action.
                            (ii) Requirements for issuing 
                        order.--The court may not grant an 
                        application under clause (i) unless the 
                        court finds that it clearly appears 
                        from specific facts that--
                                    (I) an order issued 
                                pursuant to Rule 65(b) of the 
                                Federal Rules of Civil 
                                Procedure would be inadequate 
                                to achieve the purpose of this 
                                paragraph because the party to 
                                which the order would be issued 
                                would evade, avoid, or 
                                otherwise not comply with such 
                                an order;
                                    (II) an immediate and 
                                irreparable injury will occur 
                                if such seizure is not ordered;
                                    (III) the harm to the 
                                applicant of denying the 
                                application outweighs the harm 
                                to the legitimate interests of 
                                the person against whom seizure 
                                would be ordered of granting 
                                the application and 
                                substantially outweighs the 
                                harm to any third parties who 
                                may be harmed by such seizure;
                                    (IV) the applicant is 
                                likely to succeed in showing 
                                that the person against whom 
                                seizure would be ordered 
                                misappropriated the trade 
                                secret by improper means, or 
                                conspired to use improper means 
                                to misappropriate the trade 
                                secret, and is in possession of 
                                the trade secret;
                                    (V) the application 
                                describes with reasonable 
                                particularity the matter to be 
                                seized and, to the extent 
                                reasonable under the 
                                circumstances, identifies the 
                                location where the matter is to 
                                be seized;
                                    (VI) the person against 
                                whom seizure would be ordered, 
                                or persons acting in concert 
                                with such person, would 
                                destroy, move, hide, or 
                                otherwise make such matter 
                                inaccessible to the court, if 
                                the applicant were to proceed 
                                on notice to such person; and
                                    (VII) the applicant has not 
                                publicized the requested 
                                seizure.
                    (B) Elements of order.--If an order is 
                issued under subparagraph (A), it shall--
                            (i) set forth findings of fact and 
                        conclusions of law required for the 
                        order;
                            (ii) provide for the seizure of any 
                        property in a manner that minimizes any 
                        interruption of the business operations 
                        of third parties and, to the extent 
                        possible, does not interrupt those 
                        legitimate business operations of the 
                        person accused of misappropriating the 
                        trade secret that are unrelated to the 
                        trade secret that has allegedly been 
                        misappropriated;
                            (iii) be accompanied by an order 
                        protecting the property from disclosure 
                        by restricting the access of the 
                        applicant, including during the 
                        seizure, and prohibiting any copies, in 
                        whole or in part, of the seized 
                        property, to prevent undue damage to 
                        the party against whom the order has 
                        issued or others, until such parties 
                        have an opportunity to be heard in 
                        court;
                            (iv) set a date for a hearing at 
                        the earliest possible time, and not 
                        later than 7 days after the order has 
                        issued, unless the party against whom 
                        the order is directed and others harmed 
                        by the order consent to another date 
                        for such hearing, except that a party 
                        against whom the order has issued or 
                        any person harmed by the order may move 
                        the court at any time to dissolve or 
                        modify the order after giving notice to 
                        the applicant who obtained the order; 
                        and
                            (v) require the person obtaining 
                        the order to provide the security 
                        determined adequate by the court for 
                        the payment of such damages as any 
                        person may be entitled to recover as a 
                        result of a wrongful or excessive 
                        seizure or wrongful or excessive 
                        attempted seizure under this paragraph.
                    (C) Protection from publicity.--The court 
                shall take appropriate action to protect the 
                person against whom an order under this 
                paragraph is directed from publicity, by or at 
                the behest of the person obtaining the order, 
                about such order and any seizure under such 
                order.
                    (D) Materials in custody of court.--Any 
                materials seized under this paragraph shall be 
                taken into the custody of the court. The court 
                shall secure the seized material from physical 
                and electronic access during the seizure and 
                while in the custody of the court.
                    (E) Service of order.--The court shall 
                order that service of a copy of the order under 
                this paragraph shall be made by a Federal law 
                enforcement officer, or may be made by a State 
                or local law enforcement officer, who, upon 
                making service, shall carry out the seizure 
                under the order.
                    (F) Action for damage caused by wrongful 
                seizure.--A person who suffers damage by reason 
                of a wrongful or excessive seizure under this 
                paragraph has a cause of action against the 
                applicant for the order under which such 
                seizure was made, and shall be entitled to the 
                same relief as is provided under section 
                34(d)(11) of the Trademark Act of 1946 (15 
                U.S.C. 1116(d)(11)). The security posted with 
                the court under subparagraph (B)(v) shall not 
                limit the recovery of third parties for 
                damages.
            (3) Remedies.--In a civil action brought under this 
        subsection with respect to the misappropriation of a 
        trade secret, a court may--
                    (A) grant an injunction--
                            (i) to prevent any actual or 
                        threatened misappropriation described 
                        in paragraph (1) on such terms as the 
                        court deems reasonable;
                            (ii) if determined appropriate by 
                        the court, requiring affirmative 
                        actions to be taken to protect the 
                        trade secret; and
                            (iii) in exceptional circumstances 
                        that render an injunction inequitable, 
                        that conditions future use of the trade 
                        secret upon payment of a reasonable 
                        royalty for no longer than the period 
                        of time for which such use could have 
                        been prohibited;
                    (B) award--
                            (i)(I) damages for actual loss 
                        caused by the misappropriation of the 
                        trade secret; and
                            (II) damages for any unjust 
                        enrichment caused by the 
                        misappropriation of the trade secret 
                        that is not addressed in computing 
                        damages for actual loss; or
                            (ii) in lieu of damages measured by 
                        any other methods, the damages caused 
                        by the misappropriation measured by 
                        imposition of liability for a 
                        reasonable royalty for the 
                        misappropriator's unauthorized 
                        disclosure or use of the trade secret;
                    (C) if the trade secret is willfully and 
                maliciously misappropriated, award exemplary 
                damages in an amount not more than 3 times the 
                amount of the damages awarded under 
                subparagraph (B); and
                    (D) if a claim of the misappropriation is 
                made in bad faith, a motion to terminate an 
                injunction is made or opposed in bad faith, or 
                the trade secret was willfully and maliciously 
                misappropriated, award reasonable attorney's 
                fees to the prevailing party.
    (c) Jurisdiction.--The district courts of the United States 
shall have original jurisdiction of civil actions brought under 
this section.
    (d) Period of Limitations.--A civil action under subsection 
(b) may not be commenced later than 5 years after the date on 
which the misappropriation with respect to which the action 
would relate is discovered or by the exercise of reasonable 
diligence should have been discovered. For purposes of this 
subsection, a continuing misappropriation constitutes a single 
claim of misappropriation.

           *       *       *       *       *       *       *


Sec. 1839. Definitions

     As used in this chapter--
            (1) * * *

           *       *       *       *       *       *       *

            (3) the term ``trade secret'' means all forms and 
        types of financial, business, scientific, technical, 
        economic, or engineering information, including 
        patterns, plans, compilations, program devices, 
        formulas, designs, prototypes, methods, techniques, 
        processes, procedures, programs, or codes, whether 
        tangible or intangible, and whether or how stored, 
        compiled, or memorialized physically, electronically, 
        graphically, photographically, or in writing if--
                    (A) * * *
                    (B) the information derives independent 
                economic value, actual or potential, from not 
                being generally known to, and not being readily 
                ascertainable through proper means by, the 
                public; [and]
            (4) the term ``owner'', with respect to a trade 
        secret, means the person or entity in whom or in which 
        rightful legal or equitable title to, or license in, 
        the trade secret is reposed[.];
            (5) the term ``misappropriation'' means--
                    (A) acquisition of a trade secret of 
                another by a person who knows or has reason to 
                know that the trade secret was acquired by 
                improper means; or
                    (B) disclosure or use of a trade secret of 
                another without express or implied consent by a 
                person who--
                            (i) used improper means to acquire 
                        knowledge of the trade secret;
                            (ii) at the time of disclosure or 
                        use, knew or had reason to know that 
                        the knowledge of the trade secret was--
                                    (I) derived from or through 
                                a person who had used improper 
                                means to acquire the trade 
                                secret;
                                    (II) acquired under 
                                circumstances giving rise to a 
                                duty to maintain the secrecy of 
                                the trade secret or limit the 
                                use of the trade secret; or
                                    (III) derived from or 
                                through a person who owed a 
                                duty to the person seeking 
                                relief to maintain the secrecy 
                                of the trade secret or limit 
                                the use of the trade secret; or
                            (iii) before a material change of 
                        the position of the person, knew or had 
                        reason to know that--
                                    (I) the trade secret was a 
                                trade secret; and
                                    (II) knowledge of the trade 
                                secret had been acquired by 
                                accident or mistake;
            (6) the term ``improper means''--
                    (A) includes theft, bribery, 
                misrepresentation, breach or inducement of a 
                breach of a duty to maintain secrecy, or 
                espionage through electronic or other means; 
                and
                    (B) does not include reverse engineering or 
                independent derivation; and
            (7) the term ``Trademark Act of 1946'' means the 
        Act entitled ``An Act to provide for the registration 
        and protection of trademarks used in commerce, to carry 
        out the provisions of certain international 
        conventions, and for other purposes, approved July 5, 
        1946 (15 U.S.C. 1051 et seq.) (commonly referred to as 
        the `Trademark Act of 1946' or the `Lanham Act')''.

           *       *       *       *       *       *       *