Violating the trade secrets of U.S. companies could land you in U.S. court
The U.S. Court of Appeals for the Seventh Circuit recently issued a ruling in a case involving the misappropriation of trade secrets under the Defend Trade Secrets Act (DTSA), which will have implications for transatlantic trade relations.
The case involves the U.S. company Motorola, which sued the Chinese company Hytera, alleging that Hytera misappropriated trade secrets through illegal means to develop products nearly identical to Motorola's.
Much of the misappropriation of these trade secrets took place between 2010 and 2014, but after the DTSA went into effect in 2017, Motorola filed a lawsuit against Hytera for that misappropriation, seeking substantial damages.
The extraterritorial application of the DTSA extends its legal reach beyond the United States
So far, this case is not very different from other cases that have been and continue to be brought in the United States regarding trade secrets. But what is significant about this case is that the court has awarded damages not only for those incurred in the U.S., but also—and primarily—for infringing activities carried out outside the country.
The court finds that there is a possibility of extraterritorial application of the DTSA, which extends its legal reach beyond U.S. borders. It interprets the statute as leaving this possibility open in several scenarios, such as “acts in furtherance,” which are acts that contribute to the commission of other unlawful acts and are considered a single offense.
Once an “act in furtherance” has been performed in the United States, all acts related to and directed toward the same purpose—even if performed outside the United States—have an effect within that territory and give rise to the jurisdiction of its courts.
A ruling that could affect Spanish companies
This ruling is crucial for Spanish companies that do business with U.S. companies or operate in global markets. From now on, there is a risk that, in the event of disputes over trade secrets or business secrets, U.S. companies may prefer to litigate in their own courts. By arguing that there is a connection between activities carried out both inside and outside the United States, they could attempt to extend their jurisdiction globally.
The United States has a robust and sophisticated legal framework for the protection of trade secrets and business secrets, supported by extensive case law and regulations at both the state and federal levels. Therefore, facing litigation in a U.S. court is not a particularly desirable situation for a Spanish company.
Is the ruling appropriate? To reach a conclusion on this matter, one must consider the circumstances of the case; however, if there is a breach of trade secrets with global implications, is it necessary to travel to different countries and file lawsuits in as many courts to seek a declaration of infringement and claim damages? It may not be necessary; the court finds sufficient grounds in the text of the DTSA to establish jurisdiction.
A ruling that sets an important precedent
Will this be an isolated case? I don't think so. Once the extraterritorial effect of the DTSA is established, there will be new cases, as U.S. companies will find it more appealing to play on their home turf than to have to venture onto other fields. In fact, there are already law firms recommending that this possibility be considered.
Will this affect Spanish companies? Without a doubt—you don’t have to be Chinese for an American company to sue you. This will happen when the same circumstances as in the Motorola case arise, but even in less serious and blatant situations. The ruling sets a precedent that will extend to other cases; reading it gives a glimpse of this possible future.
How to Manage Trade Secrets: Prevention Is the Best Defense
For Spanish companies, this ruling underscores the importance of handling any trade secrets or business secrets received from international partners—especially U.S. companies—with the utmost care. Even if the acquisition of these secrets is legal, mishandling or improper management could result in serious legal consequences under the DTSA.
The best defense is prevention: implement a robust trade secret management plan and follow it meticulously. This approach not only protects the company from potential litigation but also strengthens its position in the global market.
With the recent ruling in the Motorola v. Hytera case, the legal landscape is changing. Companies must be prepared for an environment in which the protection of tradesecrets and business secrets requires greater attention and care than ever before. Adapting to these new legal realities will be key to avoiding disputes and maintaining healthy and productive business relationships on the international stage.
Javier Fernández-Lasquetty, Partner in the Business and Contracts Practice at ELZABURU