On May 8, 2017, the United States Patent and Trademark Office hosted its second event on trade secrets. When we covered the USPTO’s inaugural trade secrets symposium held in January 2015, there was a palpable sense among DC insiders that, at long last, federal trade secrets legislation was imminent.
Readers of this blog of course know the rest of that story: obviously the biggest change in the landscape since the last event was the passage of the Defend Trade Secrets Act of 2016. In fact, the USPTO intentionally timed this event to fall near the one-year anniversary of the DTSA’s passage.
What else had changed in the last two years? To answer that question, I once again traveled to USPTO headquarters in Alexandria, VA to attend the symposium and provide TSW readers with the following report.
First, our own James Pooley, author of this blog’s monthly installation “Pooley’s Corner,” was among the handful of thought leaders selected to speak during the day’s events. Jim was joined by Mark Schultz of the Center for the Protection of Intellectual Property at George Mason University’s Antonin Scalia Law School and Tomoko Miyamoto of the World Intellectual Property Organization.
Second, there seemed to be an increased interest among the organizers in international issues. Jim’s panel, “Differences in Trade Secret Protection in Foreign Jurisdictions” was one of two panels (out of a total of four panels in the symposium) that focused on international trade secret laws.
Trade Secrets Damages Remains an Elusive Question
Following the opening remarks of Chief Policy Officer Shira Perlmutter, which highlighted the USPTO’s continued interest in trade secrets, the first panel of the day took a deep dive into some fairly complex questions involving trade secrets damages and valuation. A few takeaways:
- There’s often a disconnect between valuation of trade secrets by the owner and damages awarded as a result of misappropriation.
- Advances in forensics have made it easier to trace information and establish chains of custody, but simultaneous technological developments have made it easier for thieves to steal trade secrets en masse and, to some extent, cover their tracks.
- Education is key: good companies will have ongoing dialogues with their employees about who should have access to what and why certain security measures are important to the business.
Ex Parte Seizure One Year On: Much Ado About Nothing?
As many of our readers will recall, the ex parte seizure provisions of the DTSA engendered more controversy than any other aspect of the legislation. The panelists generally agreed that the ex parte seizure remedy has been invoked rarely, meaning that the law’s explicit provision that such remedy be used “only in extraordinary circumstances” (part of the amendments made in response to the criticism) has been successful. The panelists also agreed that specificity was important in crafting a proposed seizure order. As panelist Victoria Cundiff of Paul Hastings noted: “Judges will not enter an order giving anyone free reign to look around for computers.”
The two remaining panels focused on international aspects of trade secrets law. Prof. Mark Schultz of George Mason’s Center for the Protection of Intellectual Property led off with a discussion of some empirical research he has conducted regarding the relative strength of trade secrets protection across international jurisdictions. On one end of the spectrum, leaders include the United States, Canada, and Japan, while countries with the weakest protections according to the study include Indonesia, Russia, and the Philippines.
What differentiates these countries from one another? Interestingly, research showed two different factors at play. First, deep-rooted legal traditions play a role: countries with an English common law heritage that emphasized breach of duty tended to have stronger protections. Second, notwithstanding the impact of established traditions, recent legal changes such as the enactment of the Agreement on Trade-Related Aspects of Intellectual Property Rights have caused lagging countries to make improvements related to trade secrets protection.
So as trade secrets become an increasingly important form of protection for valuable business information, what considerations will drive changes in the law? Jim Pooley touched on three things:
- There is a misconception in some countries that trade secrets protection is automatically a drag on employee mobility. For instance, when we saw debate in European Parliament regarding the recent trade secrets directive, labor mobility was a driving issue, which led to some broad exceptions in the European Union that don’t exist in U.S. law.
- Trade secrets owners will always have concerns over the risk of losing protection by disclosing their trade secrets during the litigation process. Any developments in trade secrets law must understand this tension and ensure that the trade secrets of litigants are protected.
- Trade secret claims must usually be brought on incomplete evidence, because misappropriation usually occurs in secret. The information asymmetry is not a problem in the U.S. because of liberal discovery laws, but in most countries of the world plaintiffs are expected to come with a “made” case. It would improve enforcement to require some disclosure or to shift the burden of proof following the presentation of a plausible claim.
- Damages and remedies must be robust enough so that trade secrets owners aren’t disincentivized from bringing an action to protect their rights (and alternatively that would-be trade secrets thieves aren’t incentivized to steal secrets, reap the benefits, and then come out ahead after paying out damages for misappropriation – in patent law, a concept known as “efficient infringement”).
Finally, the day closed with an interesting mock panel discussing a trade secrets hypothetical involving cross-border misappropriation. Among other things, the panel, which included members from the DOJ, the USPTO, and the U.S. Chamber of Commerce, highlighted some trends and resources that all companies would be wise to consider:
- Recent bilateral trade talks have contemplated increased cooperation between China and the United States in combating misappropriation.
- Victims of international trade secrets theft have powerful resources at their disposal in the form of the International Trade Commission and the DOJ’s Criminal Division Computer Crime & Intellectual Property Section.