More Thoughts on the Seventh Circuit’s Motorola Decision

Motorola by Roadsidepictures (CC BY-NC 2.0)

Like Tim Holbrook, we found the Seventh Circuit’s decision in Motorola Solutions, Inc. v. Hytera Communications Corp. Ltd. provocative.  Motorola expands the reach of the Defend Trade Secrecy Act (DTSA) in ways that strike us as inconsistent with the Supreme Court’s concerns about extraterritorial application of U.S. law, particularly in the context of intellectual property law.

First, we were surprised by the ease with which the court rebutted the presumption against extraterritoriality by importing the extraterritorial provision in the criminal Economic Espionage Act (EEA) into the civil provision on trade secrecy violations.  Although we acknowledged that possibility in our earlier article, we noted that in RJR Nabisco, Inc. v. European Community (2016), the Supreme Court warned that without the “check imposed by prosecutorial discretion … providing a civil remedy for foreign conduct creates potential for international friction.”  Yet the Seventh Circuit did little to explain why reliance on the criminal provision of the EEA was appropriate here.  Although it cited Congress’s concerns with trade secrecy theft, it did not explain why that concern required the application of U.S. law to reach foreign sales.

Second, even if the civil private cause of action has the same extraterritorial reach as the criminal provisions, the Seventh Circuit’s application is concerning. The EEA permits reliance on U.S. law “if an act in furtherance of the offense was committed in the United States,” 18 U.S.C. § 1837(b).  Based on the phrase “in furtherance of,” the court found the defendant’s advertisements, promotion, and marketing of products embodying the trade secrets “at numerous trade shows in the United States” sufficient to allow recovery for sales worldwide even without a nexus between those U.S. activities and the sales for which it ordered recovery.

With other forms of intellectual property, much more is required.  In copyright, the predicate act doctrine (which, as Holbrook mentions, is itself controversial) requires a showing that the infringing foreign material had its source in an act of infringement that occurred within the territory of the United States.  Notably, the Seventh Circuit, in its consideration of the copyright claim in Motorola, rejected use of that doctrine on the ground that the plaintiff could not prove that the copies circulated abroad derived from a source in the United States.  In patent law, the Supreme Court in WesternGeco LLC v. ION Geophysical Corp. (2018) permitted the award of world-wide damages.  However, that case involved a statute, 35 U.S.C.§ 271(f), that was enacted specifically to reach extraterritorial conduct.  Moreover, in a footnote, the Court noted that doctrines such as proximate cause could limit or preclude global damages.  Finally, in Abitron Austria GmbH v. Hetronic International, Inc. (2023), the Court confined the application of U.S. trademark law to uses of the mark in commerce in the United States.

Giving the DTSA broader reach than copyright, patent, and trademark is troublesome in that those forms of intellectual property involve disclosure.  Moreover, patents and copyrights endure for only a specific term of years; trademarks last only so long as they are in use.  Thus, these laws ensure that new advances eventually fall into the public domain where they can be used by all.  Trade secrets are, by definition, not public and have no clear ending date.  The tension with patent law is particularly acute.  In Kewanee Oil Co. v. Bicron Corp. (1974), the Supreme Court upheld state trade secrecy law against a challenge that it was preempted by patent law, but only because the Court did not believe trade secrecy law would be used when the stronger protection provided by patent law was available.  However, an inventor’s decision to seek a patent may well change if, as in Motorola, trade secrecy law provides more protection against global infringements.

In our earlier article, we called attention to limits on potential extraterritorial reach other than the presumption against extraterritoriality.  Thus, we noted the provision in the Restatement (Fourth) of Foreign Relations Law (now § 405) entitled “Reasonableness in Interpretation.”  It calls for courts to interpret ambiguous statutes to avoid unreasonable interference with the sovereign authority of other nations as a matter of prescriptive comity.  As indicated above, we view the Seventh Circuit’s interpretation of “act in furtherance of the offense” in the DTSA as extremely broad and inconsistent with the Supreme Court’s narrow interpretation of the domestic focus on “use” in Abitron.  Moreover, it risks interfering with regulation by other countries.  Admittedly, the facts in Motorola are such that it is likely other countries would find a violation of their trade secrecy laws.  But other situations could prove more likely to cause international friction.  Although we think the preferable route would be to interpret the language in § 1837 to require a nexus between the domestic acts of misappropriation and the foreign sales, it remains open for courts to consider other comity limits to avoid serious clashes with foreign law.