Digital Rights Review: Summer 2016 Federal Copyright and Trade Secret Legislation Update

7 min

Since the Summer/Fall 2015 Update, Congress has been active in the digital rights space, passing legislation with important implications for both copyright and trade secret law. In addition to the groundbreaking Defend Trade Secrets Act of 2016 (DTSA), the 114th Congress enacted the Trade Facilitation and Trade Enforcement Act, which enhances the procedures used to protect intellectual property rights at U.S. ports and borders. Likewise, Congress has introduced several new bills with potentially significant impact on intellectual property rights. Proposed copyright legislation would establish the Copyright Office as an independent agency in the legislative branch, and change how performance royalties are distributed to record producers. Proposed trade secret legislation would protect trade secrets amid an overhaul of certain clauses in form contracts.


President Obama signed the Trade Facilitation and Trade Enforcement Act of 2015 (TFTE) into law on February 24, 2016, authorizing a comprehensive overhaul of the functions and activities of the U.S. Customs and Border Protection agency (CBP). The TFTE requires new procedures to enhance protections for domestic trade at U.S. ports and borders, including procedures specifically geared toward the protection of intellectual property rights. In particular, the TFTE amends the Tariff Act of 1930 by inserting a new section into Title 19 of the United States Code, which authorizes the CBP to provide owners of copyrights with any information appearing on potentially infringing imported merchandise, its packaging, or its labels, if examination by the copyright owner would assist CBP in determining the existence of an infringement violation. Additionally, the TFTE empowers the Department of Homeland Security (DHS) to authorize a similar enforcement process to protect copyright owners who have applied for registration of their copyright claims with the U.S. Copyright Office, but whose claims have not yet been registered. Moreover, it authorizes seizure by CBP and forfeiture of any imported technology, product, service, device, or component that circumvents U.S. copyright laws.

The TFTE also requires DHS to establish a National Intellectual Property Rights Coordination Center within U.S. Immigration and Customs Enforcement (ICE), which will investigate sources of infringing merchandise, train domestic and international law enforcement agencies on investigative best practices, and coordinate activities with CBP to prevent importation and exportation of infringing merchandise. Furthermore, the TFTE directs ICE and CBP to generate a joint strategic plan for the enforcement of intellectual property rights, which will include a recommendation for how and where the agencies should allocate resources to provide optimal protection. Other sections of the TFTE require that CBP and DHS implement training procedures so that their officers can more readily identify infringing merchandise, and that CBP and ICE report annually to Congress on their ongoing enforcement of intellectual property rights.

Another recently enacted piece of legislation shows that copyright law concerns have influenced education policy as well. Signed into law by President Obama on December 10, 2015, the Every Student Succeeds Act (ESSA) requires the integration of technology into primary school curricula, amid broader reforms to the education system. This new emphasis on technology instruction would include training teachers and educating students specifically about copyright law and the harms of copyright piracy.

The 114th Congress is also currently examining several other areas of copyright law. Perhaps the most ambitious piece of legislation, however, is the Copyright Office for the Digital Economy Act (H.R. 4241) (CODE Act). In an effort to address the operational and technological deficiencies of the U.S. Copyright Office, the proposed bill would make sweeping procedural reforms to the copyright system as a whole. Specifically, the CODE Act would remove the U.S. Copyright Office from the purview of the Library of Congress (LOC) and establish it as an independent agency within the legislative branch, headed by a Director appointed by the President with the advice and consent of the Senate. The bill would also amend the copyright registration process under Sections 407 and 408 of Title 17 of the United States Code to add a step before deposit of material with the LOC. Under the new proposal, copyright owners seeking registration of their claims would first submit examination copies to the Copyright Office. The Copyright Office would then provide the LOC with access to the copies and related data, upon which the LOC would determine whether to demand a deposit or otherwise engage with copyright owners regarding works of interest to the national library. Additionally, the CODE Act would require the establishment of a Copyright Advisory Board, consisting of experts in copyright law and practice, and meeting at least twice yearly. The Board would advise and consult with the Copyright Office to provide information about emerging practices in copyright, including technological practices. Last, the Director of the Copyright Office would be required to (1) conduct a study regarding the future administration of mandatory deposits, and submit a report on the findings of the study to Congress within a year of the enactment of the CODE Act; and (2) periodically conduct studies regarding the operational and technological capabilities of the Copyright Office.

Another proposed bill, the Allocation for Music Producers Act (H.R. 1457) (AMP Act), would amend Section 114 of the Copyright Act to require a collective designated by the Copyright Royalty Judges (CRJs) to adopt and implement a policy that would change the manner in which record producers and other persons involved in the production of a sound recording are paid. Specifically, the policy would allow the owner of an exclusive right to publicly perform a sound recording by means of a digital audio transmission to submit instructions (a "letter of direction") directing the distribution of a portion of royalty payments to a producer, mixer, or sound engineer who was part of the creative process behind the sound recording.

The following copyright-related bills were also referenced in the previous article, but are currently inactive:

Trade Secrets

The DTSA is by far the most significant new piece of trade secret legislation, creating for the first time a federal statutory framework for trade secret law. For more information about the DTSA and its far-reaching business effects, see our recent article, Digital Rights Review: Defend Trade Secrets Act of 2016.

Outside of the DTSA, Congress recently passed other legislation that impacts trade secret law. For example, the TFTE contains several provisions involving trade secrets, in addition to its copyright law implications. Specifically, the TFTE amends the Trade Act of 1974 by expressly adding trade secrets to the list of intellectual property rights protected by the Act. Accordingly, if a foreign country is identified by the U.S. Trade Representative as denying adequate protection to trade secrets or other intellectual property rights, the country will be placed on the Trade Representative's priority watch list. If the country continues to exist on the list for over a year, the Trade Representative will develop an action plan containing certain benchmarks to achieve the adequate protection of those rights. If, within a year of implementation of the action plan, the country fails to meet its benchmarks, the President may take executive action against the country.

Congress is also considering a few more bills which would carve out protections for the trade secret assets of businesses. Introduced in the House on April 28, the proposed Consumer Review Fairness Act of 2016 (H.R. 5111) would impose certain restrictions upon form contracts containing provisions that prohibit consumers from providing reviews about the products and services that they purchase or lease. However, it specifically reserves the right of businesses and persons hosting online consumer reviews to remove comments or other consumer-posted information that contains trade secrets.

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The authors would like to thank Venable LLP Summer Associate Michael Marusak for his assistance in preparing this article.