Very interesting commentary by Stephen Chow above and these are, like most all IP theoretical discussions, thought provoking issues. Thanks also to Eric for keeping us all informed on the FTSA.
Some random thoughts below on the hypothetical TST (Trade-Secret-Trolls) and the FTSA itself from the peanut gallery:
This issue of latent-trade-secret trolls about to manifest upon enactment of the federal law seems as much about how Congress acts, vis-à-vis knee jerk reactions, and the desire of commentary providers to be relevant in a real world context than it does about any legitimate IP rights. A trade secret, unlike a patent, is always in a state of flux, even after it has been litigated and subject to, for example, a re-trial. I am not aware of Markman-like Trade Secret Construction Hearings, and further, how can a NPE have access to or rights to a trade secret if they are not utilizing it as part of a license, and why would they pay for a license if they were not going to monetize that by using it? I suppose that is the primrose path that the professors wish to lead everyone down, but by licensing a trade secret to a third-party with nefarious intentions, the holder of the trade secret is subjecting themselves to losing the trade secret if it is disclosed by the alleged troll. Why would any trade secret holder be willing to license a valuable trade secret for anything less than valuable consideration? Why would any trade secret holder allow any third-party access to its trade secrets without adequate assurances that the party taking same was solvent to respond to misuse of the trade secret? Better off to just sell the company / asset.
Put yet another way, case law requires an alleged trade secret owning plaintiff to affirm / declare under oath (via the client, not counsel, sorry folks) the existence of the trade secret. To do so, one seemingly must be knowledgeable in the art field and be able to testify to not only the technical aspects of the trade secret, but also why such processes, information, etc., have value.
Still further, certain claims are personal, meaning that only the person harmed has standing to bring the suit. Professional malpractice claims would be a primary example. Looking at this matter through that lens, why would a “trade secret” troll have standing to sue for misappropriation of something they were not themselves using? It is not common for a party to “assign” their trade secrets claims to a third-party. This is likely because of the trade secret claim ought not allow for a reasonable royalty as damages to anyone other than the original owner. To be clear, trade secret claims do allow for reasonable royalties, according to MoFo in this 2011 AIPLA paper. http://www.aipla.org/2011/spring/MATERIALS/Wilson_Paper.pdf
Back to the real issue that spawned Eric’s comments on the possibility of trade secret trolls, SHOULD WE SUPPORT A FEDERAL TRADE SECRET ACT (FTSA)? Fairly compelling reasons exist for that, however, the trade secret acts of most states are pretty “uniform,” unlike, for example, myriad state law with respect to enforcement of non-competes / restrictive covenants or the elements of common law civil conspiracy. Would those claims be next for federal action and “uniformity?” Would the federal trade secret act “pre-empt” these centuries old state law claims? If yes, then perhaps Stephen’s comments take on an even greater weight with states essentially giving up claims of their citizenry via pre-emption. To be clear, and thanks again to the hard-working folks at MoFo for this link, http://www.mofo.com/resources/publications/2007/09/uniform-trade-secrets-act-preemption-an-obscure-__ , but a litigant claiming misappropriation of trade secrets may very well unwittingly be forfeiting their rights to other age old claims like civil conspiracy that could provide for easier proof and even greater damages remedies if the case makes it to trial. It seems a very good argument exists for not allowing pre-emption of these alternative remedies via a FTSA. Actually pre-emption exists already in most states’ UTSA versions, so this may not be the best argument, but my imagination is not good enough to foresee all the ways in which a party might benefit or lose by not having access to multiple claims, and not being subject to a thieving defendant arguing that because you are alleging is really a trade secret claim, you cannot pursue those other claims.
So having read through Eric’s post above and his earlier three posts (May 8, May 21 and Aug. 25, 2014 – great blog btw at www.protectingtradesecrets.com ) on the FTSA, it seems the best argument of those wishing to convince us of the inevitable manifestation of trade secret trolls is that the seizure provisions of the FTSA will be abused. I am not convinced by this. Most any lawyer that would be in the position to utilize such laws values his or her reputation (and hide) enough not to ever get in the situation where they could be credibly considered to have abused TRO provisions of any law, FRCP 65, or otherwise. This is because they know the kicked sleeping tiger will awake and if the issue was worthy of the fight, it is worthy of a fight back and that a judge, federal or otherwise, is going to review the matter at the preliminary injunction stage (with both sides of the story) and decide if the lawyer for the TRO / ex parte seizure was on solid ground. He had better be on pretty solid ground, or else the bond may be lost, the client may be lost, and the fight may be lost!
It seems what we really are looking at with the FTSA is improving the process by which a litigant can more efficiently enforce their trade secrets, and who would not be in favor of that? However, uniform provisions on preserving evidence exist already and can be sought in any court. Also, most state courts have Business Courts or other special mechanisms to get attention to an issue if it really is this important and diversity jurisdiction, or federal question (e.g., regulated product), will likely get most of these disputes into federal court If that is where the plaintiff wants to be. Also, if a thief will steal, they will destroy evidence of their theft and so the “consequences” of destroying evidence are just that, they are not going to deter the destruction (let’s not kid ourselves). The “unintended consequences” of this FTSA legislation will likely outweigh its good intentions.
I do not really have a dog in this fight, but two well known phrases come to mind as I conclude this day’s distraction: (1) “the road to hell was paved with good intentions;” and (2) since I am from South Carolina, I will, for the sake of civil discourse on the subject, stand in the “Don’t Tread on Me,” category with respect to this federal legislation, for the time being.