New Decision on Asserting the Defend Trade Secrets Act Against Foreign Entities

A recent federal court decision concluding that a Defend Trade Secrets Act (“DTSA”) claim could go forward against a UK-based defendant should be read both by foreign entities doing business in the United States and by U.S.-based entities that work with foreign affiliates. The case highlights the DTSA’s strong reach over both activity and actors residing outside the United States.

In vPersonalize Inc. v. Magnetize Consultants Ltd., Civ. No. 18-CV-01836-BJR, 2020 U.S. Dist. LEXIS 18491 (W.D. Wash. Feb. 3, 2020), a UK-based defendant moved to dismiss a DTSA claim arguing that the Economic Espionage Act’s extraterritorial provision should not apply to private civil actions under the DTSA, should not apply to a foreign entity, and should not apply unless a foreign defendant is alleged to have committed “an act in furtherance” of the violation. The court rejected these arguments and declined to dismiss the DTSA claim.

The dispute centers on the relationship between 18 U.S.C. § 1837 entitled, “Applicability to conduct outside the United States” and 18 U.S.C. § 1836, which provides a private right of action under the DTSA. Section 1837 states that “this chapter” (which includes sections 1831-1839 of Title 18) applies to conduct outside the U.S. if the offender is a U.S. citizen or permanent resident alien or an organization organized under the laws of the United States, State, or political subdivision thereof; or where “an act” in furtherance of the offense was committed in the United States. Critically, section 1837 does not specify who must commit this “act in furtherance,” and the chapter referenced in section 1837 includes section 1836.

The Washington court found that section 1837 does apply in civil DTSA cases because the chapter referenced in section 1837 includes section 1836. The court rejected the argument that the DTSA does not apply to foreign entities, finding no support for such a reading. Finally, the court determined that the act in furtherance need not be performed by a named defendant because the statute merely requires an act—saying nothing about who must commit the act. Notably, the relationship between sections 1836 and 1837 was also recently litigated in a case pending in the Northern District of Illinois. There, the court similarly ruled that the DTSA applies extraterritorially in a civil action brought under section 1836 if any of the requirements of section 1837 are met. We will continue to update you on decisions interpreting the Defend Trade Secrets Act and how it may impact your business.

Wendy R. Stein litigates DTSA cases on behalf of plaintiffs and defendants and teaches a course at Fordham Law School focused on representing foreign entities in U.S. federal court litigation.
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