Strong Enforcement of Trade Secret Laws More Important Than Ever

In the text of the Constitution of the United States the word “right” appears just once. It is in Article 1, Section 8, Clause 8.  The clause gives Congress the power to “promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

That the Founding Fathers saw fit to make ownership of intellectual property a fundamental right speaks to the importance of IP in our country’s history.  

When writing the Constitution, the Founding Fathers were concerned with enshrining protections like patents and copyrights, but U.S. law would grow to protect other types of IP, including trademarks and trade secrets.  More than 200 years later, these protections continue to be central to our nation’s economic growth. 

While all IP protections are important, protections for trade secrets are taking center stage in the 21st century economy. As the world moves to an ever-connected digital economy built on innovation and ideas, trade secrets like algorithms, data, formulas and codes are spurring new businesses, creating millions of jobs and taking the American economy to new heights.

The important role trade secrets play in underpinning the U.S. economy is perhaps best illustrated by how much is lost when trade secrets are stolen. According to an estimate, trade secret theft costs the U.S. economy as much as $540 billion.

With a cost this high, strong enforcement of our trade secret laws is more important than ever.  On this front, there is relatively good news. 

According to the U.S. Chamber of Commerce’s International IP Index, criminal prosecutions of trade secret violations increased 20 percent from 2009 to 2016 and continue to grow to this day.  As one example of these prosecutions, the Department of Justice announced a 10-count indictment against Chinese technology company Huawei in January. According to the DOJ, Huawei offered “bonuses to employees who succeeded in stealing confidential information from other companies.”

But it is not just enforcement against the Chinese that is important. Laws need to be enforced when trade secrets are misappropriated by domestic competitors too. 

In one recent case, the real estate technology company Title Source (now Amrock) was accused of misappropriating the secrets of an upcoming competitor, HouseCanary.  Emails produced in a trade secrets lawsuit indicate that soon after the two companies entered into an agreement whereby Title Source gained access to HouseCanary’s data and other proprietary information, Title Source began to discuss how to take that information and use it to build its own products, despite promising HouseCanary it would not do so. 

After a two-month trial, a unanimous jury found in favor of HouseCanary on every charge and determined that Title Source’s conduct was so egregious it should be subjected to punitive damages in addition to compensatory damages. 

The HouseCanary case comes on the heels of other notable U.S. cases, including a $500 million judgement against virtual reality startup Oculus and a nearly $250 million settlement between Uber and Waymo over trade secrets pertaining to driverless cars.

In other parts of the world, trade secret protections remain weak, and victims of trade secret theft, including U.S. companies, face significant obstacles defending their rights. Indeed, the current administration has made increased trade secret protections abroad a goal of its trade negotiations.  

The World Trade Organization’s Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement was meant to harmonize international intellectual property law and raise the bar in other nations by establishing minimum baseline protections, but as the International Chamber of Commerce noted in a 2019 report, there is still work to do before other nations catch up to the United States.

While U.S. leaders work to strengthen trade secret protections internationally, some critics have suggested the rise in trade secret litigation and enforcement here at home is a worrisome sign that necessitates new constraints. Now is not the time to turn back. Our Founders, including Washington and Madison, understood that the creators of intellectual property had a right to benefit from their creations, and all Americans should rally behind that right more than ever.

James Skyles is an attorney in Illinois whose practice focuses on internet and digital media law.

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