by Dennis Crouch
A new petition for certiorari asks the Supreme Court to resolve a critical question about the global reach of U.S. trade secret law: Does the Defend Trade Secrets Act (DTSA) allow American companies to recover damages for trade secret misappropriation that occurs outside the United States? The case, Hytera Communications Corp. v. Motorola Solutions, Inc., stems from a massive jury verdict against Chinese radio manufacturer Hytera for stealing Motorola’s trade secrets and source code. [Read the Petition]. The district court awarded damages for both copyright infringement and trade secret misappropriation — with most of the money coming from Hytera’s foreign sales. On appeal, the Seventh Circuit split on the two forms of IP – finding that the non-us-originated damages were fine for DTSA violations, but prohibited under U.S. Copyright law. Hytera petitioned to the Supreme Court only on the DTSA issue.
As with most trade secrecy cases, this one involves former employees who left with too much information. In 2008, Hytera hired away several engineers from Motorola’s Malaysian facility. Before leaving, these engineers downloaded thousands of confidential Motorola documents and source code files. Using these stolen materials, Hytera developed competing radio products that were “functionally indistinguishable” from Motorola’s. See Motorola Solutions, Inc. v. Hytera Communications Corp., 108 F.4th 458 (7th Cir. 2024).
After Motorola sued in U.S. federal court, a jury awarded nearly $765 million in damages. The district court later reduced this to about $543 million, including damages for both domestic and foreign sales of the infringing products.
The Key Legal Issue: Does the DTSA Apply Extraterritorially?
The central question raised in the petition is whether the DTSA, 18 U.S.C. § 1836(b), allows recovery of damages for trade secret misappropriation that occurs abroad. This implicates a longstanding principle of statutory interpretation – the presumption against extraterritoriality, which assumes that “United States law governs domestically but does not rule the world.” RJR Nabisco, Inc. v. European Community, 579 U.S. 325 (2016). But, the presumption against extraterritoriality is only a presumption. Congress has the power to extend the law’s reach to the entire world if done expressly. And, Congress did just that for offenses under the Economic Espionage Act (Chapter 90 of Title 18 of the U.S. Code) — which was amended in 2016 to add the DTSA.
In deciding against Hytera, the Seventh Circuit held that Congress rebutted the presumption against extraterritoriality for DTSA claims. The court focused § 1837, which states that Chapter 90 of Title 18 “applies to conduct occurring outside the United States if . . . an act in furtherance of the offense was committed in the United States.” The appellate court reasoned that because Congress placed the DTSA’s private right of action in Chapter 90, § 1837’s preexisting extraterritorial provision must extend to civil trade secret misappropriation claims. The court found that Hytera’s marketing of products at U.S. trade shows constituted a domestic “act in furtherance” sufficient to trigger § 1837’s extraterritorial reach.
In its petition for certiorari, Hytera argues that the Seventh Circuit fundamentally misread § 1837. The key contention is that § 1837’s reference to an “offense” means only criminal violations, not civil wrongs like trade secret misappropriation under the DTSA.
Hytera relies heavily on Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, 575 U.S. 650 (2015), where the Supreme Court explained that while “offense” can sometimes refer to civil wrongs, “that is not how the word is used in Title 18” where the DTSA and § 1837 are codified.
Kellogg arose from a qui tam action under the False Claims Act (FCA), where the relator (Carter) alleged that defense contractors had fraudulently billed the U.S. government for water purification services in Iraq. The key timing issue was that Carter’s claims were filed more than six years after the alleged fraud, which would typically be barred by the FCA’s statute of limitations. Carter argued that the Wartime Suspension of Limitations Act (WSLA) suspended the limitations period because the claims arose during the Iraq War. This led to the central dispute: whether the WSLA, which suspends statutes of limitations for “any offense” involving fraud against the United States during wartime, applies to civil FCA claims as well as criminal charges. The Kellogg court ultimately concluded that the term “offense” in the WSLA applies only to criminal charges, not civil claims. The Court based this interpretation on several key factors: First, the Court noted that “offense” is most commonly used to refer to crimes, citing multiple dictionary definitions from the relevant time periods. Second, the Court found it significant that while the term appears hundreds of times in Title 18 (where WSLA is codified), there was not a single instance where it clearly denoted a civil violation — not surprising since Title 18’s principle focus is on Federal Crimes and Federal Criminal Procedure.
The year following Kellogg, congress enacted the DTSA, adding a civil cause of action for trade secret misappropriations to the criminal offenses already codified within the Economic Espionage Act. It is unclear to me why they did this, but Congress chose to add the civil-focused DTSA into the EEA, which is also codified in Title 18 – the federal criminal code. Hytera argues that at the time Congress knew at the time that the definition of “offense” excluded civil actions, but made no structural changes to the statute. Ergo, the extraterritorial nature of EEA as applied to offenses, does not apply to DTSA civil actions.
The Seventh Circuit rejected this interpretation of Kellogg with a somewhat unusual interpretive approach that reconciled the DTSA’s civil provisions with § 1837’s use of the term “offense.” The court acknowledged that when § 1837 was enacted as part of the Economic Espionage Act in 1996, its reference to “offense” meant only crimes, as that was the only type of trade secret violation addressed in Chapter 90 at the time. The court further recognized that this criminal-only interpretation was reinforced by the Supreme Court’s 2015 decision in Kellogg, which held that the term “offense” in Title 18 invariably referred to criminal offenses. However, rather than viewing Kellogg as permanently fixing the meaning of “offense” in Title 18, the Seventh Circuit saw the 2016 enactment of the DTSA as fundamentally altering the landscape.
The court reasoned that when Congress placed the DTSA’s civil provisions within Chapter 90 without modifying § 1837, it must have intended § 1837’s extraterritorial reach to extend to these new civil claims. Kellogg discussed the idea that “offense” can sometimes encompass civil wrongs, and the Seventh Circuit concluded the addition of the DTSA to the EEA effectively transformed § 1837. The court bolstered this reading by pointing to the DTSA’s legislative history and purpose provisions, which expressed concern about worldwide trade secret theft and Congress’s intent to provide robust remedies for such misconduct.
Motorola has waived its right to file an opposition — suggesting that it will rest on the Seventh Circuit’s reasoning.
Both parties are represented by high quality counsel. Mark Savignac from Steptoe is counsel for Hytera and John O’Quinn of Kirkland for Motorola.