On December 2, 2015 the Senate Judiciary Committee is holding hearings on whether it is time to move forward national-level trade secret protection. Those testifying include three pro-reformers, including Jim Pooley and one on the other side – Prof. Sharon Sandeen. The following guest post comes from Prof. Sandeen and is a response to Jim Pooley’s recent Trade Secret post. – DC.
Guest Post by Sharon K. Sandeen
As a person who has been researching, writing and speaking about trade secret law for nearly twenty-five years, I am very happy that it is finally getting the attention it deserves, both in terms of increased scholarship and legislation introduced in the U.S. Congress. Thus, I read James Pooley’s recently released article, The Myth of the Trade Secret Troll: Why We Need a Federal Civil Claim for Trade Secret Misappropriation,[1] with great interest, particularly since it provides a critique of some of the arguments that David S. Levine and I discuss in our article, Here Come the Trade Secret Trolls.[2]
In truth, Jim and my views on trade secret law do not vary much. We both believe that trade secrets are important assets and that a robust and largely uniform set of laws is needed to protect legitimate trade secrets from misappropriation. However, we do tend to see trade secret law from different perspectives. Whereas Jim, and many others who advocate for ever-stronger intellectual property rights, primarily views trade secret issues from the perspective of IP owners and the asserted need for incentives to encourage innovation and creativity, my principal perspective is through the lens of information diffusion. Consistent with the longstanding policy of the United States, including the disclosure purpose of patent law, I do not think it is possible to have the optimal amount of innovation and creativity without the diffusion of information and knowledge. Call me old-school, but I am also concerned about the use of putative IP rights for anticompetitive purposes.
The difference in perspectives manifests itself in a number of ways, raising along the way many issues that are deserving of more scholarly attention. For instance, in his recent article, Jim argues that the existing system of state trade secret laws is not uniform, thereby justifying federal legislation. While I acknowledge that various differences in state laws do exist, I believe that those differences are minor, particularly as the laws are actually applied and that differences in application are often due to the fact-specific application of the elements of a trade secret claim. We also disagree on the likely impact of a federal civil cause of action. Jim thinks it is only a modest change, whereas I think it will mark a major disruption in U.S. trade secret law because there is no existing federal jurisprudence related to civil trade secret claims.
Jim’s article does highlight two issues, in particular, that I believe need to be discussed and addressed directly; differences that arise when one looks at trade secret law from the perspective of information diffusion instead of through the eyes of trade secret owners.
The first issue concerns the purpose of trade secret laws. In addition to the traditional purpose of maintenance of business ethics, Jim correctly points out that the U.S. Supreme Court in Kewanee cited the incentive purpose, recognizing trade secret law as a supplement to the incentives provided by patent protection. However, he downplays the third purpose cited by the Supreme Court; namely, the disclosure purpose. I happen to believe that this purpose is very important with respect to the diffusion of information and knowledge in our society.
Second, and related to the disclosure purpose of trade secret law, is the fact that trade secret protection is intentionally limited. This too is a point upon which Jim and I apparently disagree since he repeats the oft-stated claim that the UTSA expanded trade secret rights. However, my research into the drafting history of the UTSA reveals a more nuanced story, one that limited the scope of trade secret protection for at least three reasons.[3] First, trade secret rights were limited out of concern that they would conflict too much with patent law, including its disclosure purpose. Trade secret rights are also weak, and therefore limited, because society benefits when trade secrets (i.e., information and knowledge) leak out. Third, trade secret protection is weak (or balanced) due to concerns that trade secret litigation can be used for anticompetitive purposes.
Jim and others can disagree with the conclusions I have drawn after my evaluation of scores of source documents, but the more important point is that we need to have an open and honest debate about the extent to which trade secret law should be used to restrict the free flow of information and knowledge that is needed for innovation, creativity, and competition. Jim, at least, is the first proponent of the federal legislation to acknowledge that one of its purposes is the desire of some companies to protect more of their inventions as trade secrets instead of pursuant to patent law. If this is a purpose of the Defend Trade Secrets Act, it is time that we have an open and honest debate about whether it is wise to drive more and more companies toward trade secret protection instead of patent protection and , thereby, locking down more and more information.
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[1] 23 George Mason L. Rev. ___ (forthcoming 2016).
[2] 71 Wash. & Lee L. Rev. Online 230 (Jan. 21, 2015).
[3] Sharon K. Sandeen, The Evolution of Trade Secret Law and Why Courts Commit Error When They Do Not Follow the Uniform Trade Secrets Act, 33 Hamline L. Rev. 493 (2010).