The Defend Trade Secrets Act (DTSA) provides a private right of action under federal law for trade secret misappropriation. It extends to reach a foreign corporation’s conduct occurring outside the United States “if . . . an act in furtherance of the offense was committed in the United States.” 18 U.S.C. § 1837(2). However, the DTSA does not define “an act in furtherance” and until recently there was no case law addressing the question; absent such guidance there is uncertainty about the DTSA’s extraterritorial reach. This may be changing.
Luminati Networks, Ltd. v. BIScience, Inc. 2019 U.S. Dist. LEXIS 79843, at *21-22 (E.D. Tex. May 13, 2019) and Micron Tech., Inc. v. United Microelectronics Corp., 2019 U.S. Dist. LEXIS 74527, at *11 (N.D. Cal. May 2, 2019) appear to be among the earliest if not the first cases to define an “an act in furtherance” and their definitions support the broad extension of the DTSA to cover extraterritorial misappropriation.
In Luminati, an Israeli company, Luminati, filed suit against another Israeli company, BIScience, alleging infringement of U.S. patents and trade secret misappropriation under the DTSA. The two companies compete to provide cloud-based services for connecting devices over the Internet using residential proxy-network technology. As alleged in the complaint, BIScience improperly exploited Luminati’s trade secrets to create a competing service called GeoSurf. These actions – the misappropriation of Luminati’s trade secrets – all occurred in Israel. BIScience’s efforts to market and sell GeoSurf in the United States prompted Luminati to file suit.
BIScience moved to dismiss the trade secret claims because the allegations were not sufficient to show an act in furtherance of the misappropriation was committed in the United States. The court denied the motion based on its interpretation of the DTSA’s extraterritoriality provision as having the same meaning as similar language in federal conspiracy law. The court relied principally on the Supreme Court’s explanation in Yates v. United States, 354 U.S. 298 (1957) of what it means for an act to be “in furtherance of” a conspiracy under federal law, stating:
Applied to the DTSA, Yates makes clear that the act in furtherance of the offense of trade secret misappropriation need not be the offense itself or any element of the offense, but it must “manifest that the [offense] is at work” and is not simply “a project in the minds of the” offenders or a “fully completed operation.” [ ] Put another way, an act that occurs before the operation is underway or after it is fully completed is not an act “in furtherance of” the offense.
Luminati, 2019 U.S. Dist. LEXIS 79843, at *23 (emphasis added), citing Yates, 354 U.S. at 334.
Applying this standard, the court rejected Luminati’s argument that it was harmed by the loss of customers in Texas and the United States because U.S.-based damages are not acts “in furtherance of” misappropriation “but rather would be the consequence of a ‘fully completed operation’.” Id. at *25.
The court nonetheless found Luminati’s pleading sufficient because it supported the reasonable inference “BIScience used Luminati’s trade secrets in the United States to sell its GeoSurf service, or at least committed acts in furtherance of such sales in the United States.” Id. at *26 (emphasis added). In other words, even if the misappropriation that is the basis for the claims occurred entirely outside of the United States, allegations of acts in the United States “in furtherance of” sales in the United States of products exploiting the misappropriated trade secrets are sufficient to show “an act in furtherance of the offense was committed within the United States” as required by the DTSA.
Predating Luminati by only a few weeks, Micron Tech., Inc. v. United Microelectronics Corp., 2019 U.S. Dist. LEXIS 74527 (N.D. Cal. May 2, 2019) similarly concluded that “an act in furtherance of the offense” was not limited to the acts constituting the misappropriation. In Micron Tech., the plaintiff alleged DTSA misappropriation occurring in Taiwan and Mainland China. Id. at *10-11. Defendants moved to dismiss based on lack of specific personal jurisdiction. The court denied the motion based on its determination plaintiff sufficiently pled “an act in furtherance” under the DTSA, and, therefore, plaintiff satisfied the due process requirement that the claims arose out of contacts with the forum. Id. at *11 and *15.
Notably, the court deemed allegations that the defendants participated in job fairs and met with suppliers in California sufficient to show “an act in furtherance” in the United States, even though neither the plaintiff nor the court viewed these activities as constituting misappropriation. Id. at *10. Plaintiff was entitled to seek relief under the DTSA for acts of misappropriation committed outside of the United States based on job fairs and vendor meetings in the United States. Id. at *11.
Congress included the statement in section 5 of the DTSA that “it is the sense of Congress that trade secret theft occurs in the United States and around the world; [and] “wherever it occurs, harms the companies that own the trade secrets and the employees of the companies.” Luminati and Micron Tech. advance these policies by broadly interpreting the extraterritorial reach of the DTSA; they do not limit the extraterritorial extension of the DTSA to situations where acts constituting the misappropriation occurred in the United States.