Issues

Standing under the Uniform Trade Secrets Act – the right to pursue a misappropriation claim – is a vexing question when compared to patent, copyright, and trademark law. Instead of requiring ownership or license rights as a condition to sue, courts often find that mere possession of an asserted trade secret suffices for standing, even when the provenance of the information is murky. In some cases, courts even allow trade secret plaintiffs to claim intellectual property rights in the preferences and desires expressed to them by their customers in lawsuits designed to stop former employees from doing business with those same customers. Relaxed requirements for trade secret standing under the UTSA can weaken the showing needed to establish a valid trade secret. For example, a plaintiff with only mere possession may not always be able to account for the history of the information it possesses – but it would nonetheless be permitted to proceed even though the defendant cannot challenge whether reasonable security measures were always used to guard the information in the past. Dubious claims based on preferences expressed by customers could be transformed into intellectual property for the sole purpose of blocking an alternative supplier whom the very same customers may prefer. In the worst instances, loose standing rules centered on mere possession could encourage parties to claim rights over types of information to which trade secret law should never extend, such as workplace injury data and personal attributes of employees. This article explores how courts in trade secret cases have come to apply standing rules that are more permissive than those seen in other areas of intellectual property law. It concludes that some courts remain confused about whether trade secret claims are property rights or instead something closer to broader, looser restrictive covenants. This conceptual confusion results in questionable standing decisions inconsistent with the statutory elements of a trade secret claim and, more broadly, the goals of intellectual property law. Much of the conundrum results from a poorly-reasoned 2001 Fourth Circuit decision on trade secret standing. It offered a patina of suspect theory regarding what it styled the “inherent nature” of trade secret law and undercut a property-centered conception of trade secret law, and proposed that mere possession could suffice to assert a claim. Many courts addressing state law trade secret disputes in the last two decades have followed this decision, sometimes expressly adopting its vision of trade secret law as a relational doctrine rather than an intellectual property doctrine. This is the first comprehensive article on trade secret standing, and the first to probe the dangers posed when requirements for trade secret standing are relaxed. It will isolate the philosophy behind questionable rulings which deviate from the property-centered requirements of the UTSA. This article will also explore whether a mere-possession rule of trade secret standing undermines the requirement that a plaintiff prove that reasonable security measures were used to safeguard the information. We will explore whether allowing trade secret claims in the preferences and desires expressed by customers should be analyzed as a question of standing to best protect departing employees as well as robust market competition. The article will question whether the problematic conception of trade secret law seen in many standing cases could open the door to nontraditional trade secret claims which threaten important public policy interests. In the end, we will conclude with solutions that courts can effect without legislative change.

Advances by nearby innovators – close enough to interact in person – play key roles in patented technology development. Patents frequently cite nearby innovations, identifying these local innovations as the background for further patented inventions. Such citations reveal narrow geographic areas with intensely active innovation communities advancing similar projects and technologies. Local innovators – working within a commutable distance of 40 miles or less of each other – accounted for 25 percent of all patent citations between 2010 and 2019 and about 21 percent of citations by disinterested patent examiners reviewing patent applications. These percentages of citations to local advances are much higher than would be expected were patented technology development distributed randomly across all geographic sources. While local citations do not necessarily indicate that the cited and citing innovators worked together, their co-location indicates that the cited and citing parties were close enough to interact or to have benefitted from shared resources such as local information networks and common pools of skilled workers emerging from nearby universities. Local concentrations of citations identify regions and innovation communities producing many distinctly new advances capable of qualifying for patents. These advances are potentially important in at least two key respects: first, locally concentrated inventions disclosed in patents are important in technology development because they are outlier advances with material differences from predecessors that are capable of significantly shifting the pace and directions of technology development and, second, such locally concentrated advances (and their associated patent rights) can advance local commercial success by enabling highly functional, popular, and profitable products and services. Local concentrations of patent citations identify associated communities of especially capable and active innovators. Local innovators producing large numbers of patented advances are rapidly expanding the outer boundaries of their fields. Where these parties are concentrated in particular regions, the associated communities may establish innovation synergies that enhance innovation processes and diversify innovation results. Their group efforts may pioneer key technologies that would not have emerged from more widely separated innovators. The geographic and technological information embedded in patent records reveal many settings where geographically compact communities of innovators are advancing cutting edge technologies. This article examines innovation hot spots identified from geographic and technological information in approximately eight million citations to United States utility patents issued between 2010 and 2019. These citations, the location of the citing and cited innovators, and the technologies covered by their respective patents indicate that local innovation communities produced many technologically related innovations over this period (particularly in some of our largest innovation centers such as Silicon Valley). Patent applicants and patent examiners cited local patents from less than 40 miles away much more frequently than more distant patents, indicating that technologically similar innovation projects (and successful inventions) were particularly common in local technology hubs. More distant innovations were cited less frequently despite the availability to distant innovators of full descriptions of earlier advances in patents, electronic research services making patents easily available at great distances, and modern means for interacting with distant innovators via electronic communications or travels to meet with distant researchers. Despite electronic resources and other enhanced means to interact with distant innovators, inventors emphasized locally prevalent technologies and built on what they could learn locally. Local proximity – and the potential for direct interactions – was a demonstrably powerful force promoting successful technology development.