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.
Charles T. Graves,
CURIOSITIES OF STANDING IN TRADE SECRET LAW,
Nw. J. Tech. & Intell. Prop.