While still apparently fully on-board with ramping-up US trade secrecy law through the Defend Trade Secrets Act (DTSA), the White House has also released a new report that criticizes non-compete agreements and state laws that over-zealously enforce those agreements. Although the report recognizes that non-compete agreements are wrapped-up with trade secrecy enforcement, but suggests that a large number of non-competes are not used for that purpose. The U.S. Treasury Department released a parallel report in March 2016
The White House report explains:
[T]he U.S. economy faces a number of longer-run challenges, some of which go back several decades. In at least part of the economy, evidence suggests that competition for consumers and workers is declining, and the number of new firms each year is experiencing a downward trend. In addition to this trend, there has been a decrease in ‘business dynamism’—the so-called churn of firms and who is working for whom in the labor market— since the 1970s. One factor driving these issues may be institutional changes in labor markets, such as greater restrictions on a worker’s ability to move between jobs. To address these and other issues that limit competition in the marketplace, the President has directed executive departments and agencies to propose new ways of promoting competition and providing consumers and workers with information they need to make informed choices, in an effort to improve competitive markets and empower consumers’ and workers’ voices across the country. Building on these efforts, this document provides a starting place for further investigation of the problematic usage of one institutional factor that has the potential to hold back wages—noncompete agreements. These agreements currently impact nearly a fifth of U.S. workers, including a large number of low-wage workers. . . .
The main economically and societally beneficial uses of non-competes are to protect trade secrets, which can promote innovation, and to incentivize employers to invest in worker training because of reduced probability of exit from the firm. However, evidence indicates that non-competes are also being used in instances where the benefit is likely to be low (e.g., where workers report they do not have trade secrets), but the cost is still high to the worker.
The White House is not expected to take any immediate action but rather is offering discussion points and will likely have further comments at the signing of the Defend Trade Secrets Act later this week.
Innovation is a social good, but so is ensuring the continued viability of the companies that hire the innovators. Law no competition balances the two.
Lots of nonsense from MM below regarding presidential candidates. Does everyone know who the president was that figured out that patents would be a good thing? It was Carter. He was also the one that got the Fed. Cir. into motion. although the legislation wasn’t in place until Reagan.
So, don’t be too sure that Bernie will be bad for patents. The real enemy of patents is the fantasy world that K street has created. Reality is clear–patents are great for employees and great for innovation.
You didn’t need to dredge the Malcolm mess to the top of the thread, did you Night?
I think anon it is important for people to understand that the anti-patent movement is based on lies and K Street. A person like Carter would never have appointed the doofs that Obama has to the Fed. Cir. I think Bernie will probably get it too.
This is actually a core issue that MM did bring up covered in his usual mud.
link to washingtonpost.com
I think Bernie will probably get it too.
Bernie voted for the AIA and he voted (or at least never disapproved) of Obama’s CAFC choices.
Buy who cares? Bernie’s not going to be the Dem candidate. Everybody knows that.
don’t be too sure that Bernie will be bad for patents
Bernie isn’t going to be a candidate for President in 2016 so it’s a moot point.
He did vote for the AIA, of course, and I don’t recall him objecting to any of Obama’s Federal Circuit appointments. So it makes perfect sense that you’d totally Feel the Bern. Right?
Feel the Bern has far less to do with any patent issue and more to do with “same as it ever was” political shenanigans.
To this point, your exurberance over Hilary and your accusations (zero chance that Night voted for Sanders) combined with your typical rhetorical nonsense (your AccuseOthers meme) do more to highlight your duplicity (G-g-grifters) than anything else.
And it certainly is NOT moot at this point in time because it is a Hilary deception that the party candidacy is “moot.”
And even if or after the party candidacy is decided, and if the Democratic Party chooses Hilary, the ability to NOT vote for either is a very real and important message to be sent to the Cl0wns in BOTH parties that “same as it ever was” is not acceptable.
But go ahead and pretend otherwise because “serious” or something.
your exurberance over Hilary
Exuberance?
All I said was that I’m going to vote for her in the general election. She’s the Dem candidate. Trump is the Republican candidate.
Who are you voting for? Oh right: that’s your special secret, shy little boy.
Nothing secret – did you just not bother to read the answer already given to you on this very thread below?
Try something different Malcolm.
Although the focus here in this post is on the White House, it is relevant that the DTSA was a creation of the Republican led Congress with very broad bi-partisan support. Passing unanimously in the Senate and with a 97% majority in the House.
Malcolm’s frolic into the weeds aside, how is the party politics even “relevant” here?
Unless you want to add that Citizen’s United has helped assist the captured “attention” of both parties in the legislature, a lack of infighting between R and D does not mean somehow that the item both agree to “must be good.”
It is well known that Big Corp pandering – or having their “voice” heard – is liberally spread over both parties.
Here it comes….all the trade secret arguments that I predicted 5 years ago. There are plenty of good arguments for trade secrets. That is why you want a really strong patent system so companies will share. We are headed towards languages created just for one company, secret servers, encrypted code, etc. And, innovation taking a nose dive.
Hey Techdirt people — you get it yet? Google wants you not to be able to move from Google and not be able to talk outside of Google about what you are doing? Get it? You are like the falling cartoon character that right before they hit the ground say, “Oops.”
And notice that people like Dan do not want to address the 1980’s, which is the best evidence of what life will be like without patents or diminished patents and stronger trade secrets.
You guys got what you want. And, here’s …………………….Dan. The second wave of the K Street Specials.
We are headed towards languages created just for one company, secret servers, encrypted code, etc.
LOL
Pretty sure that rubicon was crossed a long time ago.
But nevertheless, I’ll join you just for fun: THE SKY IS FALLLING! THE SKY IS FALLING! NO MORE INNOVATION! THE SKY IS FALLING!
Whoopee! That was even more fun that I thought.
LOL
Was crossed…
Maybe you have heard the phrase: “Those that do not learn from history are bound to repeat it.”…?
Or is this (yet another) instance of the “bah-things-don’t-apply-to-Malcolm” mindset?
Maybe you have heard the phrase: “Those that do not learn from history are bound to repeat it.”…
Maybe you have heard the phrase “Same as it ever was.”
That that phrase may apply to your having to repeat history – would not be at all surprising, and your response shows that lack of appreciation for learning from history.
So, MM, five years ago I said this was coming as soon as patents were weakened enough. And here we are. Back then you yapped about like you are now. You wear your K Street pedigree on your sleeve.
NW: five years ago I said this was coming as soon as patents were weakened enough.
That’s nice. Here’s a few more predictions for you:
1) Patents are going to be “weakened” a lot more in the coming years (although the system itself will be strengthened and improved to the benefit of pretty much everyone).
2) As soon as the worst attorneys in the history of humankind start abusing this “trade secret” law (almost surely on behalf of the same entities who warped the patent system), that law is going to quickly be “weakened”, too, by the courts and by Congress. How long will it take before those abuses start showing up in earnest? Anybody’s guess. Could take as little as two to three years.
3) The “weakening” will have zero effect on the rate or quality of innovation in the useful arts.
4) You and “anon” and your cohorts will continue whining and crying and threatening to take your imaginary football to China because “the Amish” or something.
The operation was a success, but the patient has died.
1) We’ll see.
2) Wrong K-Street Special. The same companies that weakened the patent system (Google, etc.) are pushing for the trade secret laws.
3) Wrong. The weakening will devastate the innovation of economy of the U.S.
4) Whatever hindsight MM-bot (AKA, “The K Street Special”).
The White House report is mere political spin of a Treasury report – which, in turn, is political spin interpreting an academic study [ link to goo.gl ].
Treasury did no original research and cited only ten serious works written since 2010. Treasury admits: “This report benefited greatly from discussions with Professor Evan Starr, and we are grateful for his time and expertise. We also make extensive use of Starr, Bishara, and Prescott (2015). However, the views expressed here are not necessarily those of Starr and his coauthors, nor are they implicated in any errors.”
So what did Starr, Bishara, and Prescott conclude? “We find that noncompetes are associated with longer tenures, increases in the reservation wage for competitors, and increased training. We also show that employees rarely report negotiating over noncompetes, and that noncompetes are associated with no wage premium at signing but greater wage growth.”
Treasury did no original research and cited only ten serious works written since 2010.
How many “serious works” were written in the last five years?
The pattern of Obama is that he relies on the pseudo-intellectuals to make policy. The fact is that for innovation the greater the mobility of the employees the greater the innovation. I am pretty sure that all real economist that have studies innovation agree on this.
Innovation is a social good but so is ensuring the continued viability of companies that hire innovators. Non-compete law balances the two.
Dan, the problem with that is the balance of power between giant international corporations and an individual. The fact is that most employment contracts for young people are like shrink wrapped licenses. Let’s keep in mind who needs to be protected from whom.
And Dan, as predicted by me about 5 years ago, we are now seeing the great push for trade secrets and the strengthening of employment law now that patents have been greatly weakened.
The fact is that one of the best ways to give the companies a fair shake and allow freedom of movement is patents, which have now been decimated by the AIA and the Google packed Fed. Cir. along with the science illiterate justices.
Patents are the answer to protecting both interests.
Balance of power is critical when contemplating what “liberty” actually means in the reality of taking the law and putting it into practice.
Nice picture, by the way. Much better than some guy underwater holding his breath.
>>Non-compete law balances the two.
Non-competes are not healthy. Patents are healthy. The company gets what you did. What you did becomes public so the whole society can progress and share in the advance. You the employee can move and try to create more.
Just unbelievable to me that we are burning down our patent system and building up our trade secret system–serious, serious mistake.
What happened to advocating for liberty?
Are you asserting that government can, and should, compel me to make all my inventions public in exchange for a limited and negative patent right [which I can’t afford to enforce]?
I don’t want to. I want to keep at least some of them secret. And not have my former employees disclose them to my competitors. Why is that not my right as an employer? Why do you think government has any say in that matter?
You are presuming Dan that as employer that the secrets are yours.
The counter point is that employees are not vassals (at least, not yet).
I’m not assuming — I’m stating that, as a fact, the secrets are mine as the employer. Don’t like that bargain, don’t work for me.
You ARE presuming (I did not say assuming).
You have though assumed the conclusion by declaring by fiat that such are yours.
The “there’s the door” attitude is exactly why we have labor laws.
Well, you should read California’s law on the subject.
Assuming a California-law compliant invention assignment agreement is in place, the only employee-created inventions that do NOT have to be assigned to his employer are those:
(1) the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information AND
(2) do not relate, at the time of conception or reduction to practice of the invention, to the employer’s business or actual or demonstrably anticipated research or development or result from any work performed by the employee for the employer. Labor Code 2870.
The employee has the burden to prove that his invention falls within this EXCEPTION to the baseline rule and the invention assignment agreement. Labor Code 2872.
So, right from the get-go, the employee must prove he has the right to claim ownership of his inventions even developed on his own time and with his own resources AND that they do not “relate” to his employer’s “business, or actual or demonstrably anticipated research or development.” Moreover, many invention assignment agreements obligate the employee to disclose ALL of his inventions to his employer and cooperate with it in any patenting efforts [even if employee is no longer employed by the company].
When does an employee’s invention “relate to” his employer’s “business, or actual or demonstrably anticipated research or development?” Courts interpret that section of the law very broadly.
Dan, the employee does not have the burden of proof. The person who is attempting to obtain title to the patent has the burden of proof.
Dan, what I am advocating is that one clearly define in writing what a trade secret is so that that employee clearly knows what you claim to be a secret. (Of course, clearly marked confidential information is cannot be taken and given to a competitor.)
I assume you have negotiated NDA involving the disclosure of confidential information. It has to be written down and clearly designated for the obligation to attach. Same with respect to employees.
Now, if the employee invents, the invention is his, not yours. All you get is a shop right. Calling his invention your trade secret is an abuse, IMHO. But I have been involved in litigation where just such abuses have occurred.
If the employee invents then his invention is mine, not his. I don’t simply get a shop right. I get all right, title and interest in the invention.
I pay him to invent. He gets money to pay his bills, I get the fruits of his labor. Why is this a difficult transaction for you to stomach?
You should read a court decision that discusses this issue under California law. Scroll down to the part where the court discusses whether the employee’s invention is “related” to his employer’s business: link to casetext.com
Here I agree with you – if the employee is paid to invent, then the fruits have been exchanged – even before the actualization of the invention.
That being said, not every situation is like that, and there is room for the “shop right’s only” aspect.
I agree. That’s why I concluded the link to the Cadence case which addressed ownership of employee inventions and held [surprising even me] that inventions “related” to an employer’s business — and which therefore must be assigned to the employer — includes darn near everything the employer does and contemplates doing. In short, a properly drafted invention assignment agreement moots the shop right issue.
Dan, it will be interesting if some day the inventor refuses to cooperate with the company in obtaining a patent, and then, when the company sues an infringer, the recalcitrant inventor grants the infringer a license as a title holder. Then we will have equal resources on each side, like in the Stanford case, so that the issue might fairly be litigated.
Regarding the Cadence case you cited, the court relied on VICHIP, but that case did not not support the proposition for which the court cited it as the work had been completed when the assignment was made.
Moreover, California statutory law expressly exempts inventions made entirely on the inventors own time regardless that they relate to the business of the company provided that they do not use the trade secrets of the employer. In this case, there was no evidence that the invention was made using any facilities of the company. The Courts cited faxes to attorneys during prosecution of the application. That is not what the statute contemplates as work on making the invention. The burden of proof, recall, was on Cadence, not the patentee. The court never required Cadence to actually prove its case.
The best case for equitable assignment of the invention would have been that the employee’s invention was made using the trade secrets of the employer. That, however, was not shown.
You’ve completely misread Cadence.
The case reaffirms that California statutory law [Labor Code 2870 et seq] deems lawful employee invention assignment agreements that obligate employees to assign their inventions if:
(1) made with employer resources, OR
(2) which relate in any manner to the actual or demonstratively anticipated business, work, or research and development of the Company or its subsidiaries, OR
(3) which results from or is suggested by any task assigned to the employee or any work performed by him for or on behalf of the Company or its subsidiaries.
Each scenario is in the disjunctive — that is, if ANY one of those scenarios arise then the employee has an obligation to assign. That is the law.
So, no, it is not true that an employee invention made entirely on his own time with his own material is necessarily the owner of that invention. If that invention relates to the employer’s “actual or demonstratively anticipated business, work, or research and development of the Company or its subsidiaries” then the invention assignment agreement obligation to assign arises. Which is precisely how the assignment obligation arose in Cadence.
The only reason Cadence had the burden in that fact pattern was because it brought the declaratory judgement claim and the employee was not even a party to the suit. And, yes, the Court did require Cadence to “prove its case” — that is, it proved the employee’s invention related to his employer’s business AND it proved the defendant had no ownership in the patent claiming the invention and so had no standing to bring its infringement counterclaim.
I don’t how you could have gotten the case any more wrong.
Dan,
You comment: “I don’t how you could have gotten the case any more wrong.”
If you stick around, you will note that Ned does this all the freaking time.
He has a “IMHO-Ned-Law” filter that applies everything Ned touches: law, facts, and what others post.
If “whatever” appeals to the desired end that Ned agrees with, then a veneer of “That-must-be-an-Einstein” gloss is heavily applied.
Actually getting him to engage fully in a conversation runs smack into that “filter” all the time.
Good luck in getting him to fully and completely engage if that means something within his “desired end state” will be impacted.
From the footnote:
Dan, my quote from the case is held up.
Dan, I re-reread the statute, and it does read as you suggested. It apparently was amended from an earlier version that had the logic flipped.
One can view the statute as a requirement of loyalty while one is an employee — a non compete while employed.
I have no fundamental objection to this.
But that does not mean that the company automatically has a right to file a patent application on any invention without the inventor’s cooperation. He might contest that the invention falls outside the bounds of the agreement. If the employer proceeds with ultimate obtaining a assignment from the inventor, the legal title remains in the inventor. Anything might happen, including the inventor taking control of the application and abandoning it.
Ned, do you want to reconsider your newly reconsidered position in light of the AIA?
(We’ve had this discussion before, so I do not know why you want to ignore what the law now is under the AIA’s Big Corp “it takes a village” scrivining.
And just for jakes, let me add that is was Lemley that championed that little pro-Big Corp doozy.
anon, I don’t know exactly what you are driving at.
Ned: “But that does not mean that the company automatically has a right to file a patent application on any invention without the inventor’s cooperation.”
Lack of cooperation is not an impediment to the Corp taking control.
Now with filing and grant.
My AIA related question to you on a sister thread:
Do you read “real party of interest” as ONLY the inventor when you should be reading that entity as the Corp…?
Dan: I want to keep at least some of them secret. And not have my former employees disclose them to my competitors. Why is that not my right as an employer?
You certainly have the right to keep secrets and prevent your employees from spreading secrets. I’m pretty sure none of the employees at Kentucky Fried Chicken know what’s in the powder they dump into the chicken battering machine.
Why do you think government has any say in that matter?
It has as much “say” as we the people decide to give it. At some point if you believe your “rights” have been stepped on, you’re going to ask the government to help you remedy that problem, right? Or you can try the shotgun approach and take your chances with that.
I didn’t say you had to file patent applications. What is unbelievable to me is that we are weakening the patent system to make it less desirable and strengthening the trade secret to make it more desirable.
I have already predicted that companies like Google are going to switch to trade secrets. I already deal with start-ups that want to know how to keep what they are doing secret without filing for patents because “everyone knows the patent system” isn’t worth a darn.
Look, there are great arguments for trade secrets. How that is balanced with employee mobility is the key problem. Again, you want to make patents as strong as possible to discourage trade secrets and encourage disclosure.
I predicted that this was going to happen. And, my next prediction is that in about 5-7 year time span people are going to be saying, “Oh no. What have we done.”
I think we can agree that trade secret protection is much less “protective” than patent protection. There’s independant creation, failure to maintain secrecy, more difficult to enforce, even unlawful disclosures. In short, “secret” innovations enter the public domain much more readily and quicker than do patented innovations.
As an advocate for society’s access to innovation why then do you favor patents over trade secrets?
Rightful access – balanced with that emforceable right of the Quid Pro Quo.
Why do you even have to ask? It is no secret that the other extreme (just take) ain’t gonna cut it.
“anon” It is no secret that the other extreme (just take) ain’t gonna cut it.
It’s also no secret that patents aren’t going anywhere, at least for the types of innovation that benefit from patent protection.
Malcolm,
Clearly, your subset of things that you are considering as “types of innovation” is woefully incomplete, given your past on-the-record comments that ALL software per se is not the right “type” of innovation.
Thus, your comment is a meaningless post.
Dan, come on. Let’s be real. Trade secret and patents have many different aspects. A patent isn’t any good if one can’t enforce it which is becoming more and more the case. A patent also provides people with many opportunities to patent improvements. A patent also provides many people with the ability to design around what you have done (and to understand what you have done.)
Let’s be real. What is going to happen is the same thing that started to happen in the 1980’s. Yes I am that old. Way back then, companies started trying to hide everything including encrypting executable code with decryption on chips (that was Intel’s work that wasn’t finished when patents started to be used.)
Trade secrets also have layering effects. Statically, one can make some of your arguments, but as time goes by, the other companies may fall further and further behind the leader and secret keeper. Moreover, the secret keeper may build entire systems just so they can say they are trade secrets to make it hard for people to leave. Companies (like small ones) may be afraid to hire the people in fear of a law suit from the giant company.
Let’s be real about this. Trade secrets can be quite powerful and can have massive, massive affects on the industries that use them.
So, look–I’ve seen it and lived it. Trade secrets aren’t the way to go in information technology.
Let’s be real [patronizing]. Now that I’ve read all your other posts in this thread I’ve come to realize that spending time discussing this — or likely anything — with you is a waste of time.
EVERYONE should note that what Dan ran away from is reality. That is what happened already with trade secrets and patent sin the 1980’s. The most powerful evidence and arguments possible is what happened in the 1980’s.
So, my Techdirt friends this is the type of person you will be facing at Google legal. Filled with bluster and nonsense arguments to subjugate you. Say goodbye to your freedom.
And Dan you are a coward. You are faced with real history and reality and you fall back on legal arguments. Sorry sweetie but that is not real life. Nice you can make some bucks that way. You sound like the Lemley of trade secrets.
Dan,
You are showing a bit much too much sensitivity given your own rather heavy-handed posting style.
I do hope that you reconsider the choice to not engage. You have some solid points (that are actually in alignment with what our “pieces of blue sky in our lap” friend Night Writer talks about). Night Writer while tending to the hyperbolic, has actually done a decent job of connecting dots on the topic.
“anon” You are showing a bit much too much sensitivity
LOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOLOL
??
Not sure what you find so funny Malcolm – I would rather like to have Dan stick around and not go off just because he found Night Writer’s phrase a bit condescending.
You do realize that your own style of “swagger,” is several orders of magnitude far worse, right?
Not sure what you find so funny Malcolm
Of course you’re not sure.
Wake me up when Dan starts crying to Dennis about “perceptions” or some other silliness. Because he’s so “sensitive”.
LOLOLOLOLOLOLOLOLOLOLOL
You kind of missed the comment about several orders of magnitude difference – as well as the “perception” knock coming from a non-objective and unevenhanded application of any such “rules” that may or may not apply on these boards.
But then again, you already knew that, eh pumpkin?
Dan, there are economics and there are human beings. The balancing you speak of cannot simply look at the good of the company in promoting innovation. It has to consider the rights of the human beings involved.
Works are not chattel.
The human beings involved are employees. If they want to invent on their time and on their dime, fine by me. When on my time and on my dime then what they invent belongs to me. Why is this not common sense?
Here it comes….all the trade secret arguments that I predicted 5 years ago. There are plenty of good arguments for trade secrets. That is why you want a really strong patent system so companies will share. We are headed towards languages created just for one company, secret servers, encrypted code, etc. And, innovation taking a nose dive.
You know, if you look at what Dan is arguing too it is not what is important. What is important is a healthy atmosphere for employees. 1) Can they share what they are doing? 2) Can they move to new employment?
Dan is trying to set the agenda of employers’ rights. I told you all the Dans would be coming after the patents were decimated. And here he is. The first one.
Night,
There is nothing wrong (per se) with what Dan is posting or his view of pro-employer.
It is infinitely better to converse with Dan, who has shown knowledge and directness than to try to chase the duplicitous and deceiving.
At the very least, note that he is not trying to “spin” what patent law is or is meant to do. Trade Secret law does exist and even does have a place. As long as there is no deception vis a vis patent law, his inputs are a welcome addition to understanding the full legal terrain.
Thanks Dan
This report is welcome.
The issue is not just economic, in my view, but one of liberty. One must be able to work anywhere one wants, freely. This means that the worker must be able to take with him his skill and knowledge no matter where learned.
Trade secrets must be specific, documented and protected. At the time the employee is given access, he must know that the information is secret. This gives the employee sufficient information so that he or she will not divulge specific secrets when they move on.
If the so-called secret is the work of the employee? I think the employee owns the work just like he owns an invention. It is his property, not the property of the employer who gets only an shop right. Now, if the employer wants to change that, they need to file a patent application and get the employee to assign it to the employer. That way the employee exiting can be sued for patent infringement if he or she uses the invention.
Keeping everything vague and indefinite, operating under the assumption that everything the employee does is the property of the employer, is the problem here. That assumption is false — and to the extent it becomes true, it not only undermines patent law, it undermines essential aspects of liberty.