Trade Secret Thieves, Beware! The DTSA Can Reach You and Your Sales Around the Globe.

It is no secret that the misappropriation of trade secrets frequently occurs outside the United States. In a global economy, where companies have locations and markets all around the world, it is not uncommon for trade secrets created on American soil to be incorporated into products abroad and sold outside the United States. For a long time, American companies may not have sought restitution when their trade secrets were either misappropriated abroad or when products incorporating those secrets were sold abroad. But these companies may now have a path forward.

This month the Seventh Circuit in Motorola Sols., Inc. v. Hytera Commc’ns Corp. Ltd. upheld the Northern District of Illinois in finding that the Defend Trade Secrets Act (DTSA) has extraterritorial reach. Companies can seek relief when misappropriation occurs abroad and for the sales lost abroad when an act in furtherance of the trade secret misappropriation occurs in the United States.

Motorola and Hytera competed in the global market for two-way radios. In the early 2000s, Motorola developed technology for a digital mobile radio. Instead of developing its own technology, Hytera hired Motorola engineers, who worked in Malaysia, to work in Hytera’s Malaysian research and development center. The engineers downloaded more than 10,000 technical documents from Motorola’s secure databases and brought them to Hytera. Some of the documents were Motorola’s source code and that source code was “directly inserted into Hytera’s products.”

Motorola sued Hytera in the Northern District of Illinois under the DTSA. At trial, Motorola argued that it was entitled to Hytera’s worldwide profits from Hytera’s infringing products. Hytera countered that the DTSA could not be applied to Hytera’s sales outside the United States. Both the jury and district court sided with Motorola and included Hytera’s worldwide sales in the damage calculations.

On appeal, the Seventh Circuit applied the Supreme Court’s framework in RJR Nabisco and acknowledged that the question was “not whether we think Congress would have wanted a statute to apply to foreign conduct if it had thought of the situation before the court, but whether Congress has affirmatively and unmistakably instructed that the statute will do so.”

The panel found that the Congress did instruct courts to apply the DTSA to foreign conduct, reasoning that the Congress only amended chapter 90 to add a private cause of action and did nothing else to change the existing interpretation of chapter 90 (including 18 U.S.C. § 1837). The Seventh Circuit then looked to 18 U.S.C. § 1837 to determine that Congress did intend the DTSA to have an extraterritorial reach, which states in part, “[t]his chapter also applies to conduct occurring outside the United States if . . . an act in furtherance of the offense was committed in the United States.” The Court noted as “long as ‘an act in furtherance of the offense was committed in the United States,’ 18 U.S.C. § 1837(2), then all damages caused by the offense are recoverable under sections 1836(b) and 1837(2), wherever in the world the rest of the underlying conduct occurred.”

The Seventh Circuit thus found Hytera’s use of infringing products at a United States located trade show was “an ‘act in furtherance’ of its worldwide ‘offense’ within the United States” and that this “‘offense’ encompassed all misappropriations arising from the initial unlawful acquisitions by the former Motorola employees.” Given these findings, Motorola was entitled to damages for all foreign sales involving the stolen trade secrets, even though the trade secrets were initially stolen by Malaysian employees in Malaysia.

The Seventh Circuit’s finding that the DTSA applies to foreign conduct is a victory for American trade secret owners who wish to enforce their trade secret rights. On the flip side, American companies should be wary that their own conduct could come under DTSA scrutiny if their employees misappropriate trade secrets while abroad or if the companies incorporate trade secrets into foreign-sold goods.

In circumstances involving foreign sales or misappropriation schemes occurring abroad, trade secret owners wishing to enforce their rights should consult with their trade secret counsel to determine whether “an act in furtherance of the offense was committed in the United States.” If counsel finds that such an act has occurred, trade secret owners can pursue relief—whether it be damages or injunctive relief—in United States courts

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