May 29, 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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The Dangers of the New Trade Secrets Acts

First, I want to state how thrilled I am to be joining the great group here at CITP. Every CITP scholar that I’ve gotten to know over the past several years have become friends and influenced my work in areas ranging from voting machine code access to international lawmaking processes. I’m delighted to be a part of CITP’s dynamic team and environment and look forward to an exciting year. Now, on to business.

Congress is actively considering legislative responses to increased foreign cyber-espionage, driven by the perception that theft is increasing both in scale and in severity. Two bills – the “Defend Trade Secrets Act of 2014” (“DTSA“) and the “Trade Secrets Protection Act of 2014” (“TSPA“) – are the latest attempts at legislating in this area. The bills both create a new private cause of action under the Economic Espionage Act (“EEA”) for theft of commercially-valuable secret information.

Currently, trade secret misappropriation is a federal crime under the EEA, but trade secret owners can seek civil remedies only in state courts, under state laws. The theory underlying the Acts is that a private cause of action under the EEA will be an effective weapon against foreign cyber-espionage. Current law, so the argument goes, is ineffective in combating cyber-espionage.

Unfortunately, the bi-partisan sponsors of the Acts have gotten this one wrong. In reality, the Acts will create or exacerbate many existing legal problems, yet solve none. As such, Sharon Sandeen and I authored the linked letter in opposition to the sponsors of the Acts and Congress, which has been signed by 31 United States legal academics. While acknowledging that the United States needs to increase protection against cyber-espionage, we assert that, in sum, the Acts should be rejected for five primary reasons:
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