The Defend Trade Secrets Act Isn't an "Intellectual Property" Law

By Goldman, Eric | Santa Clara High Technology Law Journal, June 2017 | Go to article overview

The Defend Trade Secrets Act Isn't an "Intellectual Property" Law


Goldman, Eric, Santa Clara High Technology Law Journal


INTRODUCTION

In 2016, Congress enacted the Defend Trade Secrets Act ("DTSA"), (1) the first federal law providing civil protection for trade secrets. This statute has an unusually significant impact on trade secret law and, more generally, intellectual property law. (2)

Much of the DTSA's language copied or paraphrased existing trade secret law, including the Uniform Trade Secret Act ("UTSA"). (3) Still, the law has numerous novel provisions and rough edges that courts will need to address. (4)

This essay looks closely at one such curiosity: the odd and unprecedented declaration that the DTSA "shall not be construed to be a law pertaining to intellectual property." (5) This essay explains how this declaration preserves the status quo for 47 U.S.C. [section] 230 ("Section 230"), which immunizes websites from liability for third party content. However, the declaration potentially affects hundreds of other statutes. In general, it appears that the declaration doesn't lead to many unintended consequences; but if courts make unexpected interpretations of it, Congress may need to revise and tighten the language.

I. THE DTSA'S 2(G) PROVISION

Traditionally, trade secrets were viewed as part of unfair competition law. (6) However, reflecting the broad expansion of intellectual property's scope and importance, over time trade secrets have become routinely characterized as an intellectual property right (7) on par with copyrights, patents, trademarks and other laws protecting intangible assets. (8)

Given the near-universal modern conceptualization of trade secrets as a major category of intellectual property, it would be logical to assume that the trade secrets protections offered by the DTSA would be characterized as "intellectual property" and the DTSA would be considered an "intellectual property law." Indeed, the rhetoric supporting the DTSA's passage frequently referred to enhancing the protection of "intellectual property." For example, the Senate Report on the DTSA declares: "Trade secrets are a form of intellectual property." (9)

Yet, counterintuitively, section 2(g) of the DTSA (the "Section 2(g) Provision") says:

   This section and the amendments made by this section shall not be
   construed to be a law pertaining to intellectual property for
   purposes of any other Act of Congress (10)

Because this declaration conflicts with prevailing conceptualizations of trade secrets, the Section 2(g) Provision leaves most intellectual property experts puzzling about its origin. Unfortunately, Congress provided no clues about its intent. The Section 2(g) Provision apparently attracted little or no attention from Congress during its numerous markups and debates about the bill, and neither the Senate nor House Reports discuss it at all. So where did the Section 2(g) Provision come from, and why is it there?

II. IMPLICATIONS FOR SECTION 230

The Section 2(g) Provision resolves a potential clash between the DTSA and Section 230. To understand this conflict, I'll start with a little background on Section 230 and how it handles trade secrets issues.

Section 230 was enacted in 1996 during the early days of the Internet as a mass medium. To prevent litigation from crushing the Internet, especially during its most vulnerable nascent stage, Section 230 created a zone of immunity. (11) Summarized simply, Section 230 says online intermediaries cannot be held legally responsible for third party content or actions. For example, if a user posts defamatory remarks to an online message board, Section 230 eliminates the message board operator's possible defamation liability for those remarks. (12) Section 230 does not affect the user's potential liability for his or her own remarks.

Section 230 expressly does not immunize intellectual property claims. (13) To the extent that trade secrets are an "intellectual property," Section 230 does not eliminate online intermediaries' potential legal responsibility for third party dissemination of trade secrets. …

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