Academic journal article Yale Journal of Law & Technology

Killing the Golden Goose: The Dangers of Strengthening Domestic Trade Secret Rights in Response to Cyber-Misappropriation

Academic journal article Yale Journal of Law & Technology

Killing the Golden Goose: The Dangers of Strengthening Domestic Trade Secret Rights in Response to Cyber-Misappropriation

Article excerpt

I. TRADE SECRET LAW   A. Trade Secret Doctrine   B. Theory and Goals of Trade Secret Law II. CYBER-RISKS: CYBER-MISAPPROPRIATION AND POLITICAL   REACTIONS   A. The Cyber-Misappropriation Threat   B. The Protectionist Response to the Cyber-Misappropriation     Threat       1. The One-Sided and Inaccurate Rhetoric on Trade Secret         Cyber-Misappropriation       2. Strengthening Trade Secret Rights through Federal Law III. THE COSTS OUTWEIGH THE BENEFITS OF STRENGTHENING TRADE   SECRET LAW TO COMBAT CYBER-MISAPPROPRIATION   A. Strengthening Trade Secret Law Would Have Little Effect on Cyber-Misappropriation       1. Trade Secret Holders Have Technological and Business         Reasons for not Suing Cyber-Misappropriators       2. Strengthening Substantive Trade Secret Law Would Have         Little Impact on Cyber-Misappropriation       3. Statistical Evidence that Strengthening Trade Secret Law         Would Have Little Effect on Cyber-Misappropriation   B. Costs of Strengthening Trade Secret Law by Adding a Private     Right of Action to the EEA CONCLUSION 

In one of Aesop's fables, a farmer had a goose that laid golden eggs. Hoping to discover the source of the gold, he killed the goose. The farmer found nothing, and that, of course, was the end of the golden eggs.

In 21st century America, a different form of golden eggs is under threat--immensely valuable trade secrets encompassing much of the innovation and business strategy that power our economy. Cyber-hackers all over the world have dedicated their efforts to breaching American companies, research institutions, and government agencies to take them. Many of these hackers are well-organized and well-financed. Some are even state-sponsored. In January 2013, for example, the security firm Mandiant reported that a unit of the Chinese army had breached 115 American companies, sometimes retaining clandestine access over the course of years. (1) The problem of cyber-intrusion is pervasive and growing. For example, in one survey in 2011, companies reported an average of 1.4 successful attacks per week, a 44 percent increase from the previous year. (2)

Our worries over losing trade secrets to cyber-intruders, however, may lead us to kill our own golden goose--the vigorous competition and culture of innovation that produce our trade secrets.

One of our greatest strengths as a nation is our innovative and entrepreneurial culture. Our country produced the airplane, the assembly line, the laser, the personal computer, the internet ... the list goes on and on. (3) Innovation is a key driver of U.S. economic growth and national competitiveness. (4)

The success of American innovation stems from many factors--capital markets, an educated populace, infrastructure, funding for basic research, among others--but one important factor is our system of intellectual property law, particularly trade secret law. (5)

In essence, a trade secret is information that derives value from not being known to competitors. Trade secrets play a critical role in supporting innovation in the United States. For example, in one study, secrecy ranked first or second in importance for product innovations in "twenty-four of the thirty-three surveyed industries." (6) Trade secret law particularly favors small companies, which tend to be engines of innovation, because the hurdles to obtaining trade secret protection are relatively low. (7) In contrast to patent law, trade secrets require only reasonable efforts at secrecy from the trade secret holder to earn legal protection. (8) Moreover, trade secret protection may potentially last forever. (9)

Trade secret law, however, like other areas of intellectual property law, must strike a careful balance. Too little protection results in inadequate incentives to develop useful information and wasteful expenditures on protection. (10) Too much protection causes harm in a number of different ways. By granting too much of a monopoly on trade secret information, trade secret law prevents companies from competing to provide better products using that information. …

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