The Seventh Circuit’s affirmance of Motorola’s $407 million trade secrets award from Chinese competitor Hytera Communications Corp. has set a precedent confirming the extraterritorial reach of civil trade secrets law. Motorola Solutions Inc. successfully argued before the Seventh Circuit that Congress intended the Defend Trade Secrets Act (DTSA) to cover offenses with even limited US ties.
Specifically, the Seventh Circuit found that the language explicitly allowing extraterritorial application in the Economic Espionage Act, a 1996 criminal trade secrets statute, also applies to the 2016 civil statute in the same chapter of US law. Though district courts had already reached that conclusion, this is the first time an appellate ruling has confirmed the DTSA’s reach across borders, signifying that profits earned abroad could be at stake in domestic lawsuits if they stem from trade secrets theft by a US company or citizen. This is in contrast to the Lanham Act, which saw a 5-4 Supreme Court ruling limiting the extraterritorial reach of trademark law earlier this year.
Intellectual property attorney Joshua Hartman of Merchant & Gould LLP noted that the broad scope adopted by the Seventh Circuit for when to apply US trade secrets law to conduct abroad was surprising. The ruling emphasized that the provision “does not require a completed act” in the US, nor a domestic act to cause sales to put them in a plaintiff’s reach. Such open-ended language could potentially allow the DTSA to cover a wide range of conduct.
However, this ruling could also lead to complex international legal scenarios. Trade secrets attorney James Pooley pointed out that extraterritorial reach can encourage other countries to enforce their laws against behaviors in the US, potentially leading to a “collision of authority.”Pooley also highlighted cases like Sino Legend Chemical Co. v. International Trade Commission, where US courts contested the rulings made by foreign courts, illustrating the challenges of international legal comity.
The case arose when Hytera poached Motorola employees based in Malaysia, prompting a lawsuit from Motorola alleging trade secret theft and copyright infringement. The jury initially awarded $765 million, later curtailed to $544 million by the court, before the Seventh Circuit finally upheld a $407 million trade secrets award, while advising the lower court to reconsider a $137 million copyright award.Further litigation followed as Hytera disputed the damages but not the core allegation of theft.
Intellectual property attorney Armin Ghiam of Hunton Andrews Kurth LLP mentioned the “horrible, heinous conduct” by Hytera, which included the deletion of stolen documents and the fabrication of research and development efforts.
The opinion hinged on the extraterritoriality test found in RJR Nabisco v. European Community, where the US Supreme Court stated that there’s a presumption against extraterritorial reach unless Congress indicates otherwise in the statute. The Seventh Circuit concluded that the language “this chapter also applies” in the Economic Espionage Act sensibly covered all of Chapter 90, countering Hytera’s argument limiting its application to criminal provisions.
Ultimately, despite the potential issues with international enforcement and the complexities involved, the legal consensus suggests that robust and thoughtful application of the DTSA’s extraterritorial reach is ultimately necessary for effective trade secrets protection. The case serves as a reminder of the intricate balance required in the evolving landscape of international intellectual property law.
For a more in-depth look at the Seventh Circuit’s decision and its implications, see the full article here.