Trade Secrets and the Internet: What Remedies Exist for Disclosure in the Information Age?

By Lambrecht, Ryan | The Review of Litigation, Spring 1999 | Go to article overview

Trade Secrets and the Internet: What Remedies Exist for Disclosure in the Information Age?


Lambrecht, Ryan, The Review of Litigation


I. Introduction

The Internet bedevils the litigator: It is a legal chimera, a dissonant union of intellectual property and free speech, and no one is sure how to regulate its legal contradictions. The Internet creates great business for the legal theorist and scholar, but what is a litigator to do with its challenges to precedent? More often than not, litigators rely on conventional wisdom to solve their problems, but this may not be the best strategy given the Internet's defiance of convention and wisdom alike. For example, one of the oft-repeated notions of Internet legal thought is that once a trade secret is published on the Internet, there is nothing a trade secret owner can do to remedy his lost property rights. On its face this sounds correct, for an owner has property rights in a trade secret only so long as it remains a secret,l and as a bright-line rule courts will not enjoin disclosure once information enters the public domain.2 However, what happens when this notion is tested in litigation?

The conflict between free speech rights and property rights in trade secrets has so far only been tried in a recent trilogy of cases: Religious Technology Center v. Lerma;3 Religious Technology Center v. F.A.CT.NET, Inc.;4 and Religious Technology Center v. Netcom On-Line Communication Services, Inc.5 Decided within a month of each other, these three cases dealt with motions from the Church of Scientology to enjoin former Church members from posting confidential information on the Internet.6 The Church claimed the information was protected by copyright and trade secret law, and as a general rule injunctions against speech are the usual remedy in such causes of action.7 The defendants countered that their communications were protected by the First Amendment, which creates an almost insurmountable presumption against enjoinder of speech.8 Thus, the trilogy had great potential to resolve whether litigation could prevent trade secret loss via the Internet; unfortunately, the facts of the cases yield only an incomplete answer. Each case in the trilogy denied injunctive protection for the Church due to public domain concerns and defects in the Church's pleadings,9 so it is still unclear how courts will decide a case that is both properly pled and sympathetic to the trade secret owner. However, the trilogy raised fertile questions on the conflicts between trade secret and free speech laws.

The main revelation given by the Scientology trilogy is that free speech doctrines are especially unforgiving toward litigants seeking enjoinder. To begin with, the trilogy confirmed that courts will refuse to enjoin information after it disseminates into the public domain via the Internet.10 Furthermore, the trilogy hinted that the law on prior restraints, which forbids silencing speech by injunction before it occurs, will also prevent enjoinder of trade secret disclosure.11 When these two principles are combined, they reveal that there is absolutely no point in time when a trade secret owner can enjoin a tortfeasor to prevent the loss of a trade secret. Thus, if the First Amendment's two barriers against injunctive relief are regularly combined, and if modern communication technology remains unregulated and fully capable of distributing information globally and instantaneously, then the dawn of the next century could bring dark days for trade secret law. However, to determine whether credence should be given to this doomsday scenario, this Note will discuss what circumstances, if any, allow trade secret owners to enjoin disclosure of trade secrets on the Internet, and it examines the auxiliary options of damage awards and criminal prosecution.

II. Background

Before a discussion on remedies can begin, it is necessary to have a basic understanding of the policies behind trade secret and free speech laws. A synthesis of these two areas of law is especially problematic because they fundamentally disagree on whether enforced silence benefits or injures the interests of society. …

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