On March 5, 2020, the U.S. District Court for the Northern District of Illinois entered final judgment awarding Motorola Solutions $764.5 million, the maximum damages requested by the company, in a trade secret dispute against radio manufacturer Hytera Communications. Motorola had alleged that Hytera, a competitor, hired three Motorola engineers who stole technical, confidential documents, including trade secrets that Hytera used to develop a radio functionally indistinguishable from Motorola's.
The large jury verdict was made possible by the Illinois court's January 31, 2020, order holding that the Defend Trade Secrets Act has extraterritorial effect in private causes of action if either of the requirements in § 1837 of the Economic Espionage Act are met.
In finding that the DTSA has extraterritorial effect, the court applied the Supreme Court's two-step framework for analyzing extraterritoriality issues promulgated in RJR Nabisco v. European Community. Step one is to determine "whether the statute gives a clear, affirmative indication that it applies extraterritorially." If the conclusion of step one is no, the court asks whether "the conduct relevant to the statute's focus occurred in the United States."
Applying this framework, the court held that the plain language of the DTSA as a whole overcomes the presumption against extraterritoriality. In its analysis, the court focused on § 1837's broad reference to the Protection of Trade Secrets chapter, including the DTSA as a whole. It also highlighted other requirements in § 1837 indicating that Congress was concerned with actions taking place outside of the United States.
In this case, the court found that extraterritorial application of the DTSA was appropriate because Hytera's actions satisfy the requirements in § 1837(b)(2), which states that the EEA—and the DTSA by incorporation—applies to conduct occurring outside the United States if "an act in furtherance of the offense was committed in the United States." It found that Hytera's marketing and promotion of its products in the United States was an act in furtherance of the use of Motorola's trade secrets. As such, Motorola was permitted to argue for extraterritorial damages resulting from misappropriation that occurred after May 11, 2016, the effective date of DTSA.
The court proceeded to step two even though step one already established the DTSA applied extraterritorially. It held that this case nonetheless constituted a permissible domestic application of the DTSA. Moving to step two of the framework, the court found that the focus of the DTSA is on "creating a remedy for a trade secret's owner for misappropriation." Applying the same logic used in its application of § 1837(b)(2) to this case, it found that Motorola provided sufficient evidence to show that the use of the alleged trade secrets occurred domestically.
Extraterritorial application of the DTSA can lead to significant consequences. Although companies should always take standard measures to protect their trade secrets, this Illinois holding clarifies the expansive reach of the act. It also serves as a reminder to both foreign and U.S. companies to be aware of actions that could trigger extraterritorial application.
Originally Published 21 April, 2020
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