June 24, 2017

The Defend Trade Secrets Act and Whistleblowers

As Freedom to Tinker readers know, I’ve been an active opponent of the federal Defend Trade Secrets Act (DTSA). Though my position on the DTSA remains unchanged, I was both surprised and pleased to see that the revised Defend Trade Secrets Act now includes a narrow, but potentially useful, provision intended to protect whistleblowers from trade secret misappropriation actions.

As attendees at yesterday’s wonderful CITP talk by Bart Gellman were fortunate to hear, whistleblowing remains a critical but imperfect tool of public access to the internal operations of our institutions, from corporations to government. Trade secrecy operates in the opposite direction, and has the robust ability to thwart regulation, limit public accountability, and criminalize whistleblowing. I’ve regularly called trade secrecy the most powerful intellectual property law (IP) tool of information control, as it prevents not just use of, but access to and even knowledge about the very existence of information. Indeed, it surpasses other IP law in that power by a wide margin. Thus, if the DTSA is moving forward, the inclusion of even a limited whistleblower exception in the DTSA is a good thing.

Nonetheless, it is very important to recognize what this provision won’t achieve. As written, the provision prevents liability under federal and state trade secret law for “the disclosure of a trade secret that … is made … in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and … solely for the purpose of reporting or investigating a suspected violation of law; or … is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.” Thus, as written, the provision does not appear to immunize sharing trade secret information with the press or the public at large. As Gellman’s work has shown, the press is often the first and only avenue for access to critical information about our public and private black boxes.

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Updating the Defend Trade Secrets Act?

Despite statements to the contrary by sponsors and supporters in April 2014, August 2015, and October 2015, backers of the Defend Trade Secrets Act (DTSA) now aver that “cyber espionage is not the primary focus” of the legislation. At last month’s Senate Judiciary Committee hearing, the DTSA was instead supported by two different primary reasons: the rise of trade secret theft by rogue employees and the need for uniformity in trade secret law.

While a change in a policy argument is not inherently bad, the alteration of the core justification for a bill should be considered when assessing it. Perhaps the new position of DTSA proponents acknowledges the arguments by over 40 academics, including me, that the DTSA will not reduce cyberespionage. However, we also disputed these new rationales in that letter: the rogue employee is more than adequately addressed by existing trade secret law, and there will be less uniformity in trade secrecy under the DTSA because of the lack of federal jurisprudence.

The downsides — including weakened industry cybersecurity, abusive litigation against small entities, and resurrection of the anti-employee inevitable disclosure doctrine — remain. As such, I continue to oppose the DTSA as a giant trade secrecy policy experiment with little data to back up its benefits and much evidence of its costs.

New Professors' Letter Opposing The Defend Trade Secrets Act of 2015

As Freedom to Tinker readers may recall, I’ve been very concerned about the problems associated with the proposed Defend Trade Secrets Act. Ostensibly designed to combat cyberespionage against United States corporations, it is instead not a solution to that problem, and fraught with downsides. Today, over 40 colleagues in the academic world joined Eric Goldman, Chris Seaman, Sharon Sandeen and me in raising a variety of concerns about the DTSA in the following letter:

Professors’ Letter in Opposition to the Defend Trade Secrets Act of 2015.

Importantly, this new letter incorporates our 2014 opposition letter. As we explained,

While we agree that effective legal protection for U.S. businesses’ legitimate trade secrets is important to American innovation, we believe that the DTSA—which would represent the most significant expansion of federal law in intellectual property since the Lanham Act in 1946—will not solve the problems identified by its sponsors. Instead of addressing cyberespionage head-on, passage of the DTSA is likely to create new problems that could adversely impact domestic innovation, increase the duration and cost of trade secret litigation, and ultimately negatively affect economic growth. Therefore, the undersigned call on Congress to reject the DTSA.

We also call on Congress to hold hearings “that focus on the costs of the legislation and whether the DTSA addresses the cyberespionage problem that it is allegedly designed to combat. Specifically, Congress should evaluate the DTSA through the lens of employees, small businesses, and startup companies that are most likely to be adversely affected by the legislation.”

I will continue to blog on the DTSA as events warrant, and encourage Freedom to Tinker readers to contact their members of Congress and urge them to vote against the DTSA.