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Are trade secrets the next troll target?

The rise of the Internet has altered the ways in which most people involved in IP conduct business. This is particularly true in regards to trade secrets


Companies must now grapple with the possibility that their secrets could wind up in the hands of an international competitor in a matter of hours and thus put that company out of business. 

Meanwhile, some specialists are debating whether or not non-practicing entities (NPEs) will look to trade secrets as a tool. Today’s panel on trade secrets, “Hot Topics in Trade Secrets Law – Trade Secret Trolls: The Next Threat?”, is being led by David Bloch of Winston & Strawn. Attendees can expect to hear a discussion of the interplay between trade secret law and patent law, specifically whether the former can supplant the latter as the preferred vehicle of NPEs.

Bloch believes that a series of decisions, most notably Alice v CLS Bank, have narrowed the scope of the damages a patentee is able to get and reduced the types of technology within the scope of patent protection.

“Nobody has any sympathy for the patentee anymore,” explains Bloch. “The cynicism about patent law is, I think, suppressing their ability to get big damage awards from juries. That problem doesn’t exist for trade secrets.”

Another issue for IP firms and litigants to consider is the pending bill in Congress on trade secrets. In August, the Trade Secrets Protection Act of 2014 was introduced in the House, focusing on corporate espionage waged by foreign governments. It is companion legislation to the Defend Trade Secrets Act that was introduced in the Senate in April.

Those advocating for reform talk up the utility of federalizing trade secrets laws. Currently, states operate under their own trade secret laws, which can make the finding of perpetrators who have traveled through several states – or worse, through several states and out of the country – a particularly cumbersome responsibility. This is made all the more difficult by small businesses that cannot afford to foot the bill of the costs of trade secret theft.

The bills in Congress have a number of supporters. But not all see it as a positive development. There is at least some talk in the IP realm about trade secret law reform making it easier for former patent trolls to sue companies, claiming that their trade secrets had been stolen. Bloch, for example, likens those who would benefit from the new law to patent trolls, saying, “It strikes me as basically a nearer-term way for investors to try to monetize their investments in failed companies,” he says.

Trade secrets cases growing

Bloch’s session will be followed by one entitled, “Trade Secrets Litigation at the ITC”. It is being moderated by Anthony Sammi, partner in patent litigation at Skadden Arps Slate Meagher & Flom. Under discussion will be the interplay between the protection and prosecution and defense of trade secret actions in the International Trade Commission and how it is distinct from civil litigation in the district courts and state courts.

Because the technology surrounding IP-related issues is constantly evolving, so too is the realm of trade secrets. A steady increase in the number of cases appearing before the courts is occurring.

“I think trade secrets is a body of law that is really developing,” says Sammi. “It’s active. The number of trade secrets cases filed is growing. It is a form of intellectual property that is, in many ways, more readily accessible to companies than the substantive process of getting patents. It’s an interesting field.”

It is also a peak period for trade secrets cases at the ITC. The Commission, which provides trade expertise and guidance to the executive and legislative branches, manages to exercise a great deal of power. This is an area that is of great interest to Sammi, as well as to IP practitioners in general, and one upon which he expends to touch in his presentation.

“There are those unique provisions in the ITC, wherein they have the power to ban imports into the United States. So there’s a bit of an extraterritorial reach in the ITC, and I think the audience [at AIPLA] would be interested in examining the interplay, similarities and differences between district court and state court litigation on trade secrets versus actions in the ITC regarding trade secrets,” he says.

It is of vital importance for companies to take the proper precautions to protect against trade secret theft. This means investing in security measures and keeping secrets under wraps when conducting business with other entities, among other ways.

“[Companies] should definitely be aware of how to protect their own, and how not to expose themselves to input of other trade secrets when they’re working either in business or closely with any other companies on any joint ventures projects,” says Sammi. “It’s extremely important that they understand how to protect their own trade secrets and to prevent the trade secrets of others from intentionally or unintentionally spilling into their own, thereby creating causes of action.”

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