Global Moves To Give Corporations Yet More Legal Weapons By Strengthening Laws Protecting Trade Secrets

from the too-much-is-never-enough dept

Tue, Jan 6th 2015 1:09am — Glyn Moody

Techdirt often discusses the problems with intellectual monopolies such as copyrights, patents and trademarks. These grant powers to exclude others from using something -- creative works, inventions, words and phrases. Increasingly, they create dense thickets of obligatory permissions that make it hard or even impossible for others to build on pre-existing work. That may serve the purposes of the monopolist, but is frequently to the detriment of society. Despite the fact that the enforcement options available to holders of such intellectual monopolies have been repeatedly and disproportionately strengthened in recent years, it seems that too much is never enough: there is now a move to boost another kind of monopoly right, that of trade secrets.

These already exist of course, but by one of those strange coincidences, new initiatives to enhance greatly the reach and exclusionary power of trade secrets have appeared simultaneously on both sides of the Atlantic. In the US, there are a pair of bills -- the "Defend Trade Secrets Act of 2014″ (pdf) and the "Trade Secrets Protection Act of 2014″ (TSPA - pdf) -- both aiming "to provide Federal jurisdiction for the theft of trade secrets, and for other purposes." The Fair Competition Blog offers the following summary: If enacted, the TSPA would create a private right of action (very similar to that provided by the Uniform Trade Secrets Act ("UTSA")); permit the civil ex parte seizure of relevant evidence and of the trade secrets, to prevent their further use or disclosure; permit such actions to be brought under a five-year statute of limitations; and requiring the Attorney General to issue an annual report on the international threat of trade secrets misappropriation. There is apparently a 57% chance of the TSPA being enacted.
The USPTO is also active in this area. Here is a notice of a public meeting on the subject, to be held in January at its offices in Virginia: The protection of U.S. trade secrets from misappropriation is an Administration priority. As noted in the Administration Strategy on Mitigating the Theft of U.S. Trade Secrets (February 2013), "trade secret theft threatens American businesses, undermines national security, and places the security of the U.S. economy in jeopardy." In pursuit of the goals of the Administration Strategy through information sharing and discussion, the United States Patent and Trademark Office will hold a public symposium on issues relevant to the protection of trade secrets. Topics to be discussed include losses due to trade secret theft and challenges to protecting trade secrets, the intersection of patent and trade secret protection, trade secret issues in civil litigation, trade secret protection in foreign jurisdictions, and proposed responses to the threat of trade secret theft in the U.S.
Meanwhile, in the EU, there is a proposal for a major "Directive on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure" (pdf). The new rights would be very broad, prompting a group of leading civil organizations to write an open letter expressing their concerns about them: We strongly oppose the hasty push by the European Commission and Council for a new European Union (EU) directive on trade secrets, which contains overly-broad protection and inadequate safeguards. This unbalanced piece of legislation will result in legal uncertainty and endanger freedom of expression and information, corporate accountability, information sharing and, possibly, innovation, rather than create a competitive and sound business environment in the EU, as the Commission claims.

If the draft directive, which the Commission published in November 2013, is passed, consumers, workers, researchers, journalists and whistleblowers in the EU will be at risk. The definition of 'trade secrets' in the draft directive is unreasonably broad, enabling almost anything within a company to be deemed as such. Unsurprisingly, the draft directive text is strongly supported by multinational companies because it would enable them to sue anyone who "unlawfully acquires, uses or discloses" their so-called trade secrets. Instead, the right to freely use and disseminate information should be the rule, and trade secret protection the exception.
As well as these efforts to introduce new laws in the US and EU directly, international treaties too are being used as a vehicle for promoting the enhanced protection of trade secrets. Back in October, David Levine produced a helpful analysis of what we know about the trade secrets provisions in TPP: The elevation of trade secrecy is baked into the most recent leaked May 2014 IP chapter from the Trans Pacific Partnership Agreement (TPP). TPP, which is concluding yet another negotiating round today, is bringing trade secrecy to the international stage through efforts to harmonize IP law across continents and cultures. The role of secrecy is varied from country to country, but that has not stopped the TPP negotiators from apparently proposing language that would require criminal sanctions for unauthorized access to trade secrets.
As far as TAFTA/TTIP is concerned, we know that the lobby group Business Europe has been pushing for the inclusion of "strong trade secrets protections, combined with a commitment to effective enforcement in the TTIP" (pdf), and doubtless many companies and lobbyists have done the same. Moreover, an EU document leaked in March 2014 confirms that trade secrets are a "clear priority for the US" -- one that is unlikely to meet much resistance from the European Commission, given the plans for an EU Directive on the subject. The participation of the USTR in both the TPP and TTIP negotiations ensures close synchronization between them, so we can probably expect the existing bad ideas from TPP appearing in TAFTA/TTIP too.

Assuming those provisions are still present in the final texts of TPP and TAFTA/TTIP -- and assuming that those agreements are ratified -- they will boost significantly the current campaign from corporations around the world to turn trade secrets into yet another powerful legal weapon, just as patents, copyrights and trademarks have already become.

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Filed Under: intellectual property, protectionism, trade secrets

27 Comments

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That One Guy (profile), 5 Jan 2015 @ 11:28pm

Why?
I'm rather confused, I would have thought that between patents and copyrights, there would be no need for laws dealing with 'trade secrets'. If something does not meet the requirement for a patent, or a copyright, then why exactly does it need such strong protections again?

Also, regarding the following:

"trade secret theft threatens American businesses, undermines national security, and places the security of the U.S. economy in jeopardy."

If they really cared about the above, they'd do something about the NSA going around hacking everything they can get their hands on, and undermining security every chance they get. Screwing with digital security, while absolutely destroying foreign trust in US-based electronics companies does a hell of a lot more damage to american businesses and the US economy than some lost 'trade secrets'.
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From EU point of wiew, 6 Jan 2015 @ 1:52am

Re: Why?
Long story short:
If our Glorious Leaders/ EU Comission declares that something will help/ fix something, in reality it will do exact opposite.

Now all of you dear readers know what these cretins are actually doing on first place.

citizen of EU
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Ninja (profile), 6 Jan 2015 @ 2:09am

Re: Why?
If something does not meet the requirement for a patent, or a copyright, then why exactly does it need such strong protections again?

Because the big Corporations want that money-grabbing route open and under their control too. Wall-e is an extremely wise movie. Some companies already run entire Governments.
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Beech, 6 Jan 2015 @ 2:14am

" it would enable them to sue anyone who 'unlawfully acquires, uses or discloses' their so-called trade secrets."

So, next time the Sony hack happens, anyone who peeks can get sued to oblivion. Don't like someone? Get the Coke "secret formula", put it on a flash drive, then plant it in their car! Now you're one anonymous tip from having them out of your hair for awhile.
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Richard (profile), 6 Jan 2015 @ 2:45am

Huh
A trade secret has no legal status . It is up to its owner to protect it. If you want legal status get a patent/copright/registered design etc .

If you don't do that and someonw manages to get howld of your secret then tough luck! At least that is what it should be.

This is yet more nonsense from the have your cake and eat it too brigade!
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Anonymous Coward, 6 Jan 2015 @ 3:06am

Reading this post, the thing that most screamed out to me is CHINA!!!
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thisworld (profile), 6 Jan 2015 @ 3:36am

This is why....
Governments are increasingly outsourcing their departments' activities to private firms. It becomes difficult, if not impossible, to obtain information on the conduct of those privatised operations thereafter: it has become 'confidential commercial information'. Strengthening the trade secrets legislation is just what the private purveyors of public services want. No FOI! No whistleblowers, even.
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Yes, I know I'm commenting anonymously, 6 Jan 2015 @ 3:54am

this is basically a way to steal patents/inventions/ideas after someone else has gone public with it: Just claim it is your trade secret, the inventor now has to prove that you did not have this secret. Keep litigating until the innovator goes bankrupt, then you're the new owner.
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DocGerbil100 (profile), 6 Jan 2015 @ 4:17am

Ouch.
I've skimmed through the proposed EU Directive and read the dirty bits. It's incredibly heavy-handed, ham-fisted stuff. The biggest issue is that it's all incredibly vague, from start to finish (with one solitary exception).

- - - - -

The Directive isn't clear about what problem it's actually trying to solve. It waffles on forever about the damage to EU businesses and cross-border innovation, but gives no case studies, or even a coherent general example.

I can't think of any example of a genuine problem that these new laws would solve. I'm fairly sure the Directives writers can't think of one, either.

- - - - -

Its definition of a Trade Secret is demented, consisting basically of any information which is: (a) likely to be of commercial value; and (b) secret.

So, in other words, everything a company says is a Trade Secret is a Trade Secret, unless a respondant can prove conclusively that the information was publically available before the alleged infringement.

There's a little bit of fudge that looks like it was designed to inhibit the law from being used as a back-door patent-troll engine, but that's yer lot as far as exceptions are concerned.

- - - - -

The Directive could very easily be called the Immense Collateral Damage Directive. It goes so far out of its way to avoid being specific about almost anything, that viable causes of action are created for almost everything.

Want to tell the Environmental Health Officer that food-poisoning outbreak was caused by the three-week-old steaks in your bosses restaurant?
Shut up, they'll sue you.

Want to tell the accident investigators that the rail crash was caused by the cheap, counterfeit components your company bought?
Shut up, they'll sue you.

Want to tell the police that the reason half of India is dead or blind is because your employer's been dumping chemical waste full of arsenic into the local water supply?
Shut up, they'll sue you.

No attempt is made to shield citizens who comply with normal public health or law enforcement activity.

- - - - -

The one bit of real specificity is thrown out towards the end - and it's so incredibly specific by comparison, I have the distinct impression that it's the Directives sole, real purpose.

It has a Wikileaks clause. A right of action is created to sue any publication containing an infringing Trade Secret. Blocking Wikileaks, et al, from being seen across the EU would now require no more effort than the blocking of the Pirate Bay.

A single trip to a senior court of each country and Bob's your uncle - Wikileaks is banned from that country, entirely ex parte, with no opposition, since ISPs are offered no defense under the Directive.

- - - - -

Not only that, but the Directive enshrines in law that companies whose Trade Secrets have been infringed have the right to see infringing copies destroyed.

This raises the prospect that Wikileaks (and other such sites) can legitimately be made the subject of hacking and malware attacks with absolute legal impunity, providing they can find a friendly judge to sign off on it, somewhere in the EU.

- - - - -

The new laws, even with the tiny, fig-leaf-shaped bit of fudge designed to stop it, will almost certainly create new classes of patent and copyright trolls, with all the deliberately-leaked porn movies, speculative invoicing, litigious fun and censorship that this implies.

Interestingly, a company can claim that an unreleased movie is a Trade Secret. If the Directive becomes law, it's a distinct possibility that destructive malware attacks against pirates will one day suddenly become legal as well, with no due process, warning or legal countermeasure. And here we all were, thinking ACS:Law and Prenda were bad enough.

- - - - -

No attempt is made to balance out the new laws with any part of the rest of EU legislation, beyond a few very short instructions that local legislators must ensure the law is proportionate and compliant with other EU laws.

How local legislators are supposed to do this, when the new law is designed specifically to carve out vast exceptions to all other law, is left entirely to the imagination.

I personally don't imagine the resulting ad-hoc legislative fixes will be particularly fair or proportionate.

Then again, I'm not sure that this new directive is necessarily legal itself, given how badly it rips the guts out of the Human Rights Act.

This is probably the most damaging piece of legislation I've ever read. Let's hope it doesn't survive.
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Anonymous Coward, 6 Jan 2015 @ 6:12am

NLRB
Some of the rulings of the National Labor Relations Board show the issue of trade secrets. For example, in the collection of recent rulings on the use of Social Media, a related issue on the secrecy of employee handbooks comes up. As a corrective action, the Board has required that the Employer publicly post the employee policies, and confess that these are not secret.

Google:

national labor relations board rulings trade secrets

-- - -

There are numerous cases where a silly "trade secrets" excuse is used to justify firings.
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Anonymous Coward, 6 Jan 2015 @ 6:48am

Re: Huh
A trade secret does have legal status, as illustrated in part by reference to the Supreme Court's decision in Ruckelshaus v. Monsanto. Curiously, the court appears to view trade secrets as property, which is an interesting take since the underlying basis for protecting trade secrets is holding persons accountable for breaching obligations of confidence...a uniquely contract-like basis.

What is missing from all the discussion here and elsewhere, and academics are notorious for simply ignoring this, is a clear and concise definition of what a trade secret actually is. On this point there is no uniformity. One source for a definition is the Restatement of Torts 2nd (a legal compendium), another the Uniform Trade Secrets Act (a proposed model for state legislation), and yet another the Restatement of Unfair Competition (also a legal compendium).

Ultimately, using one or more of these resources, and perhaps others based upon principles of common law, most states have adopted legislation that defines within their respective boundaries what precisely comprises a trade secret. As of yet there has not been any federal legislation defining what comprises a trade secret, and the two bills mentioned in this article continue in that tradition. What the two bills do attempt to do is try to formulate some means by which trade secret holders are not hamstrung by jurisdictional disputes that unfairly limit their ability to seek recourse against persons who have secured knowledge of trade secrets via improper means (which in essence comprises a breach of a valid confidential obligation, active encouragement for someone to break such an obligation, etc.), but because trade secrets are state law based must contend with factual and legal permutations associated with 50+ jurisdictions.
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Richard (profile), 6 Jan 2015 @ 7:20am

Re: Re: Huh
A trade secret does have legal status, as illustrated in part by reference to the Supreme Court's decision in Ruckelshaus v. Monsanto.

That may be - but my point was that it should not have such status - given the existence of patents, which are supposed to remove the need to keep such secrets.

What is missing from all the discussion here and elsewhere, and academics are notorious for simply ignoring this, is a clear and concise definition of what a trade secret actually is.

Good point - and one that undermines (to some extent) your earlier point. How can a court give legal status to something for which no clear definition exists.

What clearly does have a defined meaning is a breach of a contract of confidentiality. However I think it is dangerous to invent an ill defined legal construct in order to make it simpler to pursue a certain kind of case.

The world is (unfortunately) populated with people who view such constructs as a means to make money without doing anything useful.
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Anonymous Coward, 6 Jan 2015 @ 7:53am

Re: NLRB
If one is in an "at will" jurisdiction an employer does not need any reason to fire anyone.

And since when did employee handbooks become trade secrets. Used to be that employees took such handbooks home, and if they went home it would be hard to classify them as secret. Any document considered secret should not be leaving the company's premises.
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John Fenderson (profile), 6 Jan 2015 @ 7:56am

Dilution of "national security"
"trade secret theft threatens American businesses, undermines national security, and places the security of the U.S. economy in jeopardy."

None of this is true, but I laughed at the inclusion of national security in the list. Keep it up! Apparently everything that big corporations hate undermines national security. Keep misusing the term and it will lose its mystical power. That's something I can get behind.
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John Fenderson (profile), 6 Jan 2015 @ 7:57am

Re: Re: NLRB
One of the things you have to do to have a "trade secret" is take active measures to, you know, keep it a secret. Publishing them in a book would violate that requirement unless the people receiving the book have signed a non-disclosure agreement. I wonder if they'll go that far?
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Anonymous Coward, 6 Jan 2015 @ 8:08am

Re: Re: Re: Huh
By "missing here" I was referring to the fact that the two bills deal with trade secrets, but do not define what they are. That continues to be whatever the law is in the states, DC, and US territories/commonwealths.

As for patents rendering trade secrets unnecessary, this is where it is important to understand what a trade secret is. Trade secrets are all about information, and most such information does not relate to anything associated with patent law. While some business information might relate to patentable subject matter (e.g., a method for formulating an alloy), there are oftentimes compelling reasons for a business to hold the information in confidence as better serving its business interests.

Patents can be formidable, but the requirement of disclosure to the public carries with it significant risks. At the same time, trade secrets present significant risks, with the primary one being the difficulty of actually maintaining information in secrecy. Moreover, unlike patents, independent derivation, including by reverse engineering, is perfectly legal.
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Anonymous Coward, 6 Jan 2015 @ 9:51am

Re: Ouch.
"The Directive isn't clear about what problem it's actually trying to solve. It waffles on forever about the damage "

Anything that a high percentage of a nation cannot understand should AUTOMATICALLY be shredded to bits in front of the backers, litterally

I cannot even understand how this is even acceptable in any self proclaimed free government, unless i make the assumption that theres corruption

If we cant even get the basics down, i dont even want to think whats been filtered outwards
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Thrudd, 6 Jan 2015 @ 10:07am

Ouchies
I inadvertently read that as "literally shredding the backers " and now I am just a little ashamed that it literally brought a smile to my face.
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That One Guy (profile), 6 Jan 2015 @ 4:10pm

Re: Re: Re: Re: Huh
Moreover, unlike patents, independent derivation, including by reverse engineering, is perfectly legal.

Currently perhaps, but if these nightmare bills make it through, that would change. How could you reverse engineer something if you didn't have access to it after all? Into court with you, have fun being bankrupted.
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Anonymous Coward, 6 Jan 2015 @ 4:48pm

Re: Re: Re: Re: Re: Huh
Learn what a trade secret is and you will be able to answer your own question without any difficulty whatsoever.
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Anonymous Coward, 6 Jan 2015 @ 6:05pm

Re: Why?
Without trade secret laws, What incentive would there be for companies to create trade secrets?
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Anonymous Coward, 7 Jan 2015 @ 3:05am

Trade secrets? You mean like my ultra secret recipe for making waffles? I'll sue the pants off you and have you thrown in jail if you publish my ultra secret waffle recipe online!

Seriously though. If this goes through humanity is super fucked. Corporations will have even more rights than people do. People will cower in fear and not dare blow the whistle on corporate wrongdoing. For fear of prison.

Remember the Sony emails showing the MAFIAA bribing attorney generals? You just leaked a trade secret. Mike would be in prison right now.
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Anonymous Coward, 7 Jan 2015 @ 5:44am

Re:
The fact you use the word "bribing" strongly suggests you did not actually read the purloined emails, but instead deferred to the opinions of others inclined to spew anything negative about industry associations and their membership in order to foster a false narrative.

And, btw, if you run a restaurant that has a reputation for making and serving an excellent waffle which affords you an actual or potential commercial advantage over others, it is quite possible that the recipe and manner of making the waffle is a legitimate trade secret that will, if you take reasonable measures under the circumstances to keep it secret, be enforced against anyone who secures (or attempts to secure) that secret by improper means. Even your hypothetical intended to mock the idea of trade secrets is a failure in logic and law.
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John Fenderson (profile), 7 Jan 2015 @ 9:18am

Re: Re:
"The fact you use the word "bribing" strongly suggests you did not actually read the purloined emails"

Why do you think that it suggests that rather than suggesting that he did read the emails and considered the term "bribe" to be an accurate and justifiable description of the the situation?

Bribery is, after all, pretty much how the majority of the government operates. Only it happens to be legal and they don't call it bribery. A rose by any other name, though...
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toyotabedzrock (profile), 7 Jan 2015 @ 5:20pm

This is an anti whistle blower law that encourages companies to treat workers as disposable.
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Richard (profile), 8 Jan 2015 @ 5:48am

Re: Re: Re: Re: Re: Re: Huh
Learn what a trade secret is and you will be able to answer your own question without any difficulty whatsoever.

How can he do that - given what you said earlier?

What is missing from all the discussion here and elsewhere, and academics are notorious for simply ignoring this, is a clear and concise definition of what a trade secret actually is.
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Anonymous Coward, 8 Jan 2015 @ 12:27pm

Re: Re: Re: Re: Re: Re: Re: Huh
If you take the time to read each of the cited resources you would have a very good understanding of what trade secrets comprise. It must be borne in mind, however, that being matters of state law there will be slight differences among many of the laws, as is true of most laws dealing with common subject matter. Most states have adopted the provisions of the UTSA, with a few making some changes to the provisions of the model law.
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