Potential Trade Secrets Troll in West Virgnia

A few weeks ago we introduced the idea of the trade secrets troll, loosely defined as a company or individual that invokes trade secret protection to avoid public disclosure of unfavorable information, while claiming that such protection is needed to protect the information from competitors. A recent news story suggests that every day may bring a new trade secrets troll, the latest in West Virginia.

The left-leaning political blog Wonkette summed up the story well with its headline, “Freedom Industries Would Love To Tell You About The Other Chemical They Spilled, But Sorry, ‘Trade Secret’”

Two weeks after a chemical used for coal cleaning spilled in West Virginia’s Elk River (which feeds the state’s public water supply), Freedom Industries announced that 300 gallons of a substance identified only as “PPH, stripped” had been included in the spill. While Freedom Industries alerted the State Department of Environmental Protection that the PPH had been included in the spill, Freedom Industries did not disclose the specific chemical identity of the substance, claiming that such information was ”proprietary.” Based on the available information, the Center for Disease Control was only able to say that the chemical was “

Freedom Industries is entitled to legitimate trade secret protection like any other company. But it seems prudent to recognize some tipping point, clearly surpassed in this case, where the public interest in disclosure begins to outweigh a company’s interest in maintaining a competitive advantage through secrecy. Does Freedom Industries have any legitimate competitive interest in preventing disclosure? Or is it using trade secret law to protect itself from the ire of those whose water it may have poisoned?

Trade Secrets Trolls

by Glenn Schieck, Alexander Goldman, and Tom Bengera

Summary: We have identified several cases in which trade secrets law is being invoked for no competitive purpose. It is being used to protect information that, if known, would lower the value of the product to consumers. In light of this trend, it may be time to reexamine the requirements of what constitutes a trade secret worthy of judicial protection. If trade secret trolls can use the protection of this law not to protect innovation, but to withhold unpopular information from the public, the law is being used for a purpose that is not justified, and we all seem to lose. The bulk of trade secrets law is state law. We hope that courts will act to identify and to remedy the problem by using the tools of statutory construction. If they do not or cannot, then legislatures may need to act.


The Uniform Trade Secrets Act (UTSA), § 1(4)(i), requires that a trade secret “derive[] independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use. . . .” This provision makes clear that trade secret protection is intended to protect information from reaching the hands of specific competitors. Of course, trade secret law achieves this goal by secreting the information from everyone. From a practical standpoint, this overly protective approach makes sense. Even though most consumers would not start producing their own Coca-Cola if they knew the recipe, it is impossible to determine who would use the information and who would not, and there is usually little to no harm resulting from such overprotection. For example, most people haven’t lost sleep wondering just how curlicue fries are made. See Lamb-Weston, Inc. v. McCain, 941 F.2d 970 (9th Cir. 1991).

But what happens when harm does result from this overprotection? In an age of increased transparency and access to information, trade secret law appears to be emerging as a powerful tool for companies to keep information secret from the general public. So long as there is at least one ostensible competitor who could “obtain economic value from [the information]’s disclosure or use,” trade secret protection offers blanket protect of that information, in most cases for an unlimited amount of time. People who abuse trade secrets law in this way can only be known as trade secrets trolls.

The word “troll” is convenient because it is familiar in the context of patent law. Both patent trolls and trade secrets trolls abuse intellectual property law in order to protect an interest that is not justified by the policy of the law. But there are significant differences between patent trolls and trade secrets trolls. Patent trolls extract a fee from inventors by using the law in a manner that is outside the justification of the patent contract between the inventor and the state. Patent trolls hope to never have their claims tested in court and in order to avoid court, they ask for a significant sum of money from each victim that is less than the amount it would cost each victim to litigate their case. In contrast, trade secrets trolls use the law to hide embarrassing information. Unlike patent trolls, trade secrets trolls do not make money from their use of the law. Trade secrets trolls expect to litigate their secrecy claims. They expect to win because each case will turn on the letter of the law and not reach the policy behind it.

All intellectual property trolls may benefit from a trend in case law and statute that increasingly sees intellectual property as analogous to tangible property. See, e.g. Mark A. Lemley, Property, Intellectual Property, and Free Riding, 83 Tex. L. Rev. 1031 (2005). Lemley notes, for example, that Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1010-20 (1984) held “that trade secret laws confer a property right that cannot be ‘taken’ by government disclosure of the secret unless the government pays just compensation.” Id. at 1036, n.11. Trade secrets trolls may benefit from this trend if courts are so blinded by the property analogy that they fail to require that the trade secrets plaintiff prove that the defendants will “obtain economic value from its disclosure or use.” UTSA § 1(4)(i).

A hypothetical may help to illustrate the point. Imagine that a non-profit consumer rights organization obtains a casino company’s internal customer list from one of the company’s former employees. The list contains the names and addresses of people the company considers to be highly susceptible customers. The consumer rights organization wants to publish the list to alert the customers that they are on this list. The company could likely invoke trade secret protection to enjoin the disclosure of the list, even though the real purpose in protecting the information is not to protect the contents of the list from competitors (as required by the UTSA), but is instead to prevent the customers from learning that they are on the list.

In recent months, several real life examples of this trend have been playing out around the country, situations where individuals and companies claim to be protecting business information from their competitors, but where the real goal is to prevent public access to information.

Fracking Regulation

Hydraulic fracturing (fracking) involves injecting a mixture of sand, chemicals, and water into the ground in order to release oil deposits located beneath rock formations. As states grapple with how to properly regulate fracking, many oil companies have stated that the recipe for the mixture pumped into the ground constitutes trade secrets, and that this should prevent public disclosure.

States have enacted a hodgepodge of approaches to determining whether the information at issue constitutes trade secrets. This chart, details a state-by-state breakdown of how states apply trade secret protection to fracking recipes. While some states require full public disclosure of the chemicals used in the process, setting a high hurdle for trade secret protection, other states only require oil companies to disclose the use of those chemicals deemed hazardous by OSHA. This article at JD Supra gives a nice rundown of the “tug of war” this patchwork of regulation has created.

The claim that these fracking recipes need to be protected against competitors as trade secrets should be met with some skepticism. While new competitors have steadily entered the fracking market, three large and highly sophisticated companies, Halliburton, Schlumberger, and Baker Hughes, still account for over 60% of the fracking activity in the country. Further, an oil company fracking in multiple states is only protected by the lowest common denominator of state level protection offered. Put differently, what purpose is served by allowing an oil company to maintain secrecy in one state, while requiring full disclosure in another state?

It seems much more likely that these recipes are being deemed trade secrets to prevent their disclosure to the public through government regulatory agencies, in order to stem the almost certainly negative publicity that would result for these companies. And if this is the case, these oil companies are trade secrets trolls.

Obamacare in North Carolina

When a government entity invokes trade secret protection, it usually does so to protect companies that have submitted confidential information to it. The North Carolina Department of Insurance (NCDoI) recently declared that health care premiums are a trade secret.

The NCDoI said that it could not release the rates until they were final. “The three insurers who will be on the North Carolina exchange, one of 33 to be run by the federal government, say that their rates are not final until the feds sign off on the plans. Until then, they consider it a competitive secret.” NCDoI’s claim was unusual because the secrecy was to last for only a few weeks.

Could the state have done more to release the information? In Minnesota, the state could not publish the rates until the “effective date” of the policy. “So state officials have asked insurers who will offer plans on the exchange to change the effective date to Sept. 6, from Oct. 1, so residents can get access to the information before the exchanges open.”

Minnesota’s solution to the trade secrets problem makes sense — if your goal is to provide information to the public. If North Carolina’s officials called the data a secret in order to hinder that state’s healthcare exchange, then they are using trade secrets laws for political purposes. If North Carolina’s officials are using trade secrets laws for political purposes, that would make them trade secrets trolls.

Voting Booth and Election Technology: Behind the Curtain

Recently, litigants have tried but failed to persuade a court to require companies that make voting machines to disclose their proprietary software. Of particular interest is a Florida case in which the court highlighted the value of maintaining transparency throughout the voting process, but nevertheless allowed the election company litigant to shield their source code during discovery. Jennings v. Elections Canvassing Comm’n, 958 So. 2d 1083 (Fla. Dist. Ct. App. 1st Dist. 2007) (the voting machines were made by Election Systems & Software, Inc.) (for commentary, see Jessica Ring Amunson & Sam Hirsch, The Case of the Disappearing Votes: Lessons from the Jennings v. Buchanan Congressional Election Contest, 17 Wm. & Mary Bill Rts. J. 397 (2008)).

The absence of a specific competitor seems once again to run afoul of UTSA § 1(4)(i). If election companies are using trade secret protection as a shield to protect flawed software from public scrutiny, then the election companies are trade secrets trolls.

Safety Protocols at Sea World

SeaWorld is trying to prevent the Occupational Safety and Health Administration (OSHA) from publishing its killer whale show safety protocols. A SeaWorld trainer was killed by a killer whale in 2010. Tilikum, the whale that killed the trainer, had killed another trainer in 1991 in Canada. The case has received renewed attention with the release of the film “Blackfish,” which describes the story of Tilikum. One review of the film called the trainer’s death “inevitable.”

An OSHA administrative law judge issued a preliminary ruling that the safety protocols are not secret because they would be obvious to anyone attending a SeaWorld killer whale show, but the judge’s ruling is pending, subject to review by the agency. If the safety measures are obvious to tourists, why is SeaWorld arguing that they are secret? What if SeaWorld is not invoking trade secrets law to protect innovation, but instead to protect itself from the negative media attention that would ensue from releasing its safety protocols? What if SeaWorld’s killer whale trainer safety is embarrassingly inadequate, and that is why SeaWorld does not want OSHA to publish its safety protocols? That would make SeaWorld a trade secrets troll.


The question in these cases is whether the mere existence of a competitor should be enough to allow a company to invoke trade secret protection. Trade secrets law is traditionally based on two justifications: a property right in the secret, enforced by law against anyone who misappropriates it and uses it to compete unfairly against the inventor of the secret; and a right established by the relationship between the parties requiring the party to whom the trade secret has been disclosed to keep it confidential. Justice Holmes preferred the relational tort, writing, “[t]he property may be denied, but the confidence cannot be.” E. I. Du Pont De Nemours Powder Co. v. Masland, 244 U.S. 100 (1917). Justice Blackmun later used the property justification (in a takings case in which Monsanto claimed that the EPA had taken its trade secret pesticide data, cited by Lemley supra), writing “[t]he value of a trade secret lies in the competitive advantage it gives its owner over competitors.” Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1020, n. 15 (1984). Justice Blackmun limited the property justification by explaining, “[i]f, however, a public disclosure of data reveals, for example, the harmful side effects of the submitter’s product and causes the submitter to suffer a decline in the potential profits from sales of the product, that decline in profits stems from a decrease in the value of the pesticide to consumers, rather than from the destruction of an edge the submitter had over its competitors, and cannot constitute the taking of a trade secret.” Id.

Trade secrets law protects innovation. Like most intellectual property laws, it gives a right to an inventor in order to incent innovation. Society pays a cost in terms of the free flow of information, and expects a benefit: more innovation. When trade secrets law is used for other purposes, society not only receives no benefit; society may be harmed.

We have identified several cases in which trade secrets law is being invoked for no competitive purpose. It is being used to protect information that, if known, would lower the value of the product to consumers, in the manner described by Justice Blackmun. In light of this trend, it may be time to reexamine the requirements of what constitutes a trade secret worthy of judicial protection. If trade secret trolls can use the protection of this law not to protect innovation, but to withhold unpopular information from the public, the law is being used for a purpose that is not justified, and we all seem to lose. The bulk of trade secrets law is state law. We hope that courts will act to identify and to remedy the problem by using the tools of statutory construction. If they do not or cannot, then legislatures may need to act.

J. Crew Complaint Illustrates Issues with Litigating Misappropriation Cases Under New York Law

By Robert A. Levine, ’13

In a recently filed case, the popular clothing brand J. Crew Group, Inc, accused an ex-designer of stealing confidential information his new job at Bonobos, a competing clothing line. J. Crew claims its “confidential and proprietary information [includes] product designs, . . . productions schedules, manufacturing resources, and other information concerning [its] business operations,” such as budgets and marketing strategies. At first glance, this would appear to be a typical case of an employee leaving one company for its competitor (and taking the former’s trade secrets with it). Indeed, Law360’s headline for the case reads, “J. Crew says Designer Lifted Trade Secrets for New Gig.” However, J. Crew’s complaint notably lacks any mention of the actual term “trade secret.” The complaint illustrates the unique considerations for lawyers that litigate misappropriation cases under New York law.

New York is one of three states that has yet to adopt a Uniform Trade Secrets Act. A claim for trade secret misappropriation in New York relies on common law. New York courts have adopted the definition of trade secret from Section 757 of the Restatement of Torts. Per comment b of the Restatement, “A trade secret may consist of any formula, pattern, device or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it.” Unlike the Uniform Trade Secrets Act, the Restatement has a “use” requirement – the secret must be deployed “for continuous use in the operation of the [claimant’s] business.”

Analysts, included noted trade secrets Professor Eric Claeys, have questioned the vitality of the “use” requirement beyond specific, sub-sets of facts. However, it is by all accounts still “good law” in New York. For example, in Massachusetts (which, along with Texas, has also not adopted a Uniform Trade Secrets Act), courts have spent some time specifically discussing the “use” requirement. In Portfolioscope, Inc. v. I-Flex Solutions Ltd., 473 F. Supp. 2d 252 (D. Mass. 2007), the District Court of Massachusetts noted that, although “one District of Massachusetts judge [had] questioned the vitality of this continuous use requirement,” the requirement is nonetheless “part of Massachusetts law and this court is powerless to remove it.”

New York also recognizes a claim for misappropriation of a plaintiff’s property where defendant improperly acquired the property in order to compete with plaintiff. This “unfair competition” claim is broader, and can be applied to both real and intangible property, such as “ideas.” Like traditional trade secret cases, these claims involve analysis of the “commercial advantage” afforded to the defendant by the misappropriated property. However, they have a heavier focus on whether the property (or idea) is “unique” and/or “novel.” In Daou v. Huffington, No. 651997/2010 (N.Y. Sup. Ct. Oct. 25, 2011) — a case involving an “idea” for a blog — the New York Supreme Court held that “New York law recognizes the tort of misappropriation of ideas when a plaintiff’s factual assertions establish that the misappropriated ideas were both novel and concrete.”

So is J. Crew’s claim merely one for misappropriation of its property and ideas? Maybe. However, J. Crew’s legal team included a separate claim for unfair competition. That claim (in paragraphs 18 and 19 of the complaint) alleges that Defendant “engaged in unfair competition by, among other things, unlawfully misappropriating and using J. Crew’s confidential information for the benefit of J. Crew’s competitor, Bonobos . . . .” This claim seems to be more aligned with the second type of misappropriation claim discussed above.

Ultimately, this case will likely come down to whether and to what extent Defendant was bound by a non-disclosure agreement (described in paragraph 8). J. Crew will also need to persuade a jury that Defendant’s act of sending J. Crew’s confidential information to his personal computer evidences intent to use that information against J. Crew, and for Bonobos. However, it provides a good example of the “legal tightrope” that New York litigators may need to walk in order to avoid having to prove that their client’s pre-commercial ideas, designs, etc., are “trade secrets” and “continuously used” in their business.

(3/5/13 update: On February 1, 2013 TSI filed a version of the this Commentary in reaction to the filing of J. Crew’s complaint in this case. It is has been edited to reflect a later settlement between the parties and stipulated dismissal. The original Commentary’s substantive analysis of J. Crew’s claim has been preserved to the extent possible.)

Is there a “Secret” to Success in Reality TV Formatting?

By Robert A. Levine, ’13

When one network attempts to rip-off another network’s program, the aggrieved party may turn to its legal counsel to see if there are any claims against the perceived “copycat” show and its producers. While a written expression of ideas such as scripts are copyrightable intellectual property, see 17 U.S.C. § 101 (2010), some entertainment industry executives and lawyers argue there is a “gap” in protection in regards to “entertainment formats,” and specifically in the context of reality television programming. See generally Edwin Komen, Are Formats the Floormats Of Copyright?, Law360 (Jul. 10, 2012), http://www.law360.com/articles/358214/are-formats-the-floor-mats-of-copyright- (hereinafter Komen). As a result, rights holders have attempted to bring causes of action based on other legal theories, such as trade secrets. This circumstance recently played out in the Central District of California, where ABC allegedly copied one of CBS’ reality TV shows, and CBS attempted to frame the conduct as an act of trade secret misappropriation.

On May 10, 2012, CBS Broadcasting, Inc. (“CBS”) filed suit against ABC, Inc. and the Walt Disney Co. (“ABC) in the Central District of California, alleging ten causes of action, including trade secrets misappropriation. Complaint at 1-2 CBS Broadcasting Inc. v. American Broadcasting Companies, Inc. (“CBS Broadcasting”) (C.D. Cal. 2012) (No. 12-04073) (“Compl.”). CBS airs a popular reality television show Big Brother. Id. The network claimed that ABC misappropriated several of CBS’ trade secrets — including production processes for Big Brother — in developing a new reality series Life in a Glass House (“Glass House”). Id. at 15-16. CBS argued that these processes were unique in the industry and made Big Brother successful by enabling the show’s staff to “prep, produce, edit and deliver each episode in two and a half days.” Id. at 16. CBS believed that ABC improperly acquired knowledge about these processes from former Big Brother producers and staff whom ABC hired to work on Glass House. Id. at 16-17. The workers all had non-disclosure agreements with CBS. Id.

CBS later filed a Temporary Restraining Order (TRO) with the Court to enjoin ABC from airing its program. See generally Application for a Temporary Restraining Order CBS Broadcasting Inc. v. American Broadcasting Companies, Inc. (C.D. Cal. 2012) (No. 12-04073) (“TRO”). However, the Honorable Gary A. Feess denied the TRO, expressing “serious doubts as to CBS’s ability to demonstrate either [1] that the purported trade secrets listed qualify for protection; or [2] that Defendants are actively misappropriating any such trade secrets.” Order Re: Application for Temporary Restraining order at 13 CBS Broadcasting Inc. v. American Broadcasting Companies, Inc. (C.D. Cal. June 21, 2012) (No. 12-04073) (“Order ”).

One party alleging that another stole an idea for a TV show (or movie, for the matter) is by no means uncommon. See, e.g., Kenneth Basin & Tina Rad, “I Could Have Been A Fragrance Millionaire”: Toward A Federal Idea Protection Act, 56 J. Copyright Soc’y U.S.A. 731, 732-33 (2009) (listing “idea . . . litigation” cases in the entertainment industry, and noting that “the still growing field of reality television may prove the most lawsuit-prone genre yet” (internal citation omitted)). The Ninth Circuit has a particular expertise in dealing with these types of cases, as “Hollywood” falls within the Circuit’s jurisdictional borders. Claims for stolen “ideas” – whether it be in the entertainment industry or otherwise — are typically brought through a breach of contract cause of action. E.g. Basin & Rad, 56 J. Copyright Soc’y U.S.A. at 734 (“The majority of idea theft law claims are brought under the theory of an express or implied contract.”); see also Grosso v. Miramax Film Corp., 383 F.3d 965, 968 (9th Cir. 2004) opinion amended on denial of reh’g, 400 F.3d 658 (9th Cir. 2005) (holding that a breach of an implied contract claim alleging theft of a movie idea is not preempted by the Copyright Act).

However, these claims typically stem from a “pitch meeting” gone awry: a writer shares a “brilliant idea for a new film or television program,” and the producer rejects the idea, only to later use it without compensating the “idea purveryor.” See Aileen Brophy, Whose Idea Is It Anyway? Protecting Idea Purveyors and Media Producers After Grosso v. Miramax, 23 Cardozo Arts & Ent. L.J. 507, 524 (2005). In CBS, there was no meeting or pitch: CBS’ claim is essentially one of a copycat television show format. Parties generally face an uphill battle when attempting to assert their television format as protectable intellectual property, see generally Jonathan Coad, TV Format Rights Owners Face Large Reality Cheque, The Guardian (Apr. 24, 6:59 EDT), http://www.guardian.co.uk/media-network/media-network-blog/2012/apr/24/tv-format-rights-reality-cheque, and “format wars have had a long history with no clear-cut victor . . . .” Komen (citing K. Raygor and E. Komen, Limitations On Copyright Protection For Format Ideas In Reality Television Programming, 2009 MEDIA LAW RESOURCE CENTER BULLETIN, Issue No. 4, at 97-121 (December 2009)). As such, CBS attempted to combine various causes of action to stop ABC from airing its show, focusing mainly on copyright infringement and trade secret misappropriation. However, as Judge Ness noted in his order denying the TRO, CBS not only conflated the copyright and Trade Secret issues, but most of CBS’ alleged intellectual property may simply be unprotectable.

CBS’ copyright infringement claim boiled down to “whether there [was] substantial similarity between Big Brother’s protected elements and elements of Glass House.” Order at 5. Copyright law protects the “concrete expression of . . . ideas,” but not “general plot ideas” or “procedure[s], process[es], system[s], or method[s] of operation.” Id. 6-7 (internal citation and quotation marks omitted); see also 17 U.S.C. § 102(b). Nor does it aim at rewarding one’s labor in the interest of fairness. Id. at 7 (citing Feist Publications, Inc., v. Rural Tele. Serv. Co., 499 U.S. 340, 350 (1991)). “CBS cannot merely cobble together a series of structural and conceptual reality television ‘elements’ having little, if anything to do with ‘specific details’ or ‘concrete elements’ of the artwork, and then claim the combination of these vague elements substantiate a substantial similarity finding . . . .” Id. at 11. Indeed, Judge Ness goes as far as to suggest that the nature of reality-based television shows – i.e. that their “the fundamental premise is . . . to let ‘reality’ play its course” – may take the form outside the gamut of copyright protection all together. See id. at 12 (noting that reality television shows do not “entail a ‘plot as that term is normally used’ in the context of copyright law, and that “[r]eality . . . is hard to copy” (internal citation omitted)).

This was not the first time CBS had been unsuccessful at utilizing copyright law to protect its television formats. Indeed, the network had previously tried (and failed) to gain a TRO against ABC on a similar copyright infringement legal theory regarding ABC’s show “I’m a Celebrity… Get Me Out of Here.” See CBS Loses Fight to Stop US Version of ‘I’m a Celebrity…’, Brand Republic (Jan. 14, 2003 4:00 PM), http://www.brandrepublic.com/news/168059/CBS-loses-fight-stop-US-version-Im-Celebrity/. Thus, CBS added a rather novel trade secret claim to the TRO, which essentially framed ABC’s copycat programming as an act of corporate espionage. In cases of stolen ideas that do not involve submissions — and rather “dueling pairs of conspicuous projects” – trade secret claims may be actionable “to the extent they involve corporate espionage . . . .” Basin & Rad, 56 J. Copyright Soc’y U.S.A. at 759 n.129.

The Court held that CBS had failed to present enough evidence to warrant a TRO. While the specifics of CBS’ alleged trade secrets were redacted from their motion, see TRO at 18 and Appendix A, the Court nonetheless deemed the information “generic material,” and refused CBS’ carte blanche claim that the “[unique] combination of characteristics and components” created a “unified process” that was both confidential, and “afford[ed] a competitive advantage . . . .” Order at 13 and n.8 (citing Vermont Microsystems, Inc. v. Autodesk, Inc., 88 F.3d 142 (2d. Cir. 1996); O2 Micro Intern. Ltd. v. Monolithic Power Systems, Inc., 420 F.Supp.2d 1070 (N.D. Cal. 2006)).

Although CBS presented some viable circumstantial evidence misappropriation (i.e. ABC did in fact hire former Big Brother employees with non-disclosure agreements), the Court noted the lack of direct evidence of misappropriation. Order at 13-14. While direct evidence is not necessarily required, the Court refused to let CBS rely on the inevitable disclosure doctrine and other indirect evidence to completely halt a multi-million dollar television production. Order at 13-14.

Although unsuccessful in this instance, I do not believe that Judge Ness’ ruling forecloses the possibility that a network can have viable trade secrets in the processes used to create forms of entertainment. The existence and protection of such a secret could make the threat of a misappropriation claim a valuable tool to help fill in the current gap in protection. While at least one author has campaigned for a “Federal Idea Protection Act,” see generally Basin & Rad, 56 J. Copyright Soc’y U.S.A. at 758-66, and other aggrieved parties have attempted to use creative ways to bring claims for idea theft, see, e.g., Eriq Gardner, NBCU, BBC Win ‘Stolen’ TV Idea Case, THR, Esq. (Oct. 4, 2010 8:59 AM), http://reporter.blogs.com/thresq/2010/10/judge-rules-stolen-tv-idea-doesnt-equal-criminal-racketeering.html (describing Christopher Cardillo’s “legal theory” that NBCU and BBC engaged in “criminal racketeering by running a website that allowed people to submit ideas for new TV shows” after the networks allegedly stole his idea for a reality show about a “family of four that travel around the nation in a Winnebago”), formats appear to at least be “floor mats [of] copyright.” Komen. Moreover, given the propensity for American based networks to import foreign reality programming formats, the issue has become global. See International Format Lawyers Association, http://www.ifla.tv/ (last visited Sep. 14, 2012) (describing the need for an “international network of . . . [television] format lawyers” (emphasis added).

As parties generally lack the ability to stop others from simply replicating their success in the entertainment industry, the threat of trade secrets claims (framed as acts of corporate espionage) appears to be a novel approach and could offer additional protection. It would also influence networks to beef up security measures surrounding productions in order to prove they took reasonable precautions to protect their information, and preserve a claim for trade secret misappropriation. That being said, while “‘reality’ fare have become [a] source of the [television] industry’s success,” Arthur R. Miller, Common Law Protection for Products of the Mind: An “Idea” Whose Time Has Come, 119 Harv. L. Rev. 703, 711-12 (2006) (internal citation omitted), property is only worth protecting so long as it remains valuable. As was the case with the ill-fated Glass House, networks may lose “interest[] in pursuing . . . case[s] against . . . show[s] [that] no one is watching anyway.” Sean O’Neal, CBS Decides that ABC’s Big Brother Rip-Off Isn’t Even Worth Dignifying with a Lawsuit, A.V. Club (Aug. 17, 2012) (noting CBS had dropped its suit, and released a statement that “[t]he viewers had spoken and delivered the ultimate form of justice against The Glass House”).

Trends in Trade Secret Enforcement

By Lillian Tan ’12

Trade secret protection, normally left to the jurisdiction of states, has become a growing concern of the federal government. Over the last several months, the federal government’s prosecution of trade secrets theft under the Economic Espionage Act (“EEA) (18 U.S.C. §1831 et. seq.) spiked, and it has found other means of enforcement such as Computer Fraud and Abuse Act (“CFAA”) (18 U.S.C. §1030 et seq.) and even Section 337 of the Tariff Act of 1930 (19 U.S.C. §1337(a)(1)(A)).

In the last three years alone, U.S. Attorneys have used the EEA in a number of trade secrets theft cases. Two cases, United States v. Yang and United States v. Pu, were brought to the U.S. Attorneys’ attention by companies. This highlights the fact that companies are capitalizing on the EEA and cooperating with federal law enforcement to protect trade secrets. In Yang, a former senior software engineer for CME Group was indicted for misappropriating over 1,000 source code files from a secure computer system to his personal computer with the intent to use the source code as the backbone for his future company’s system. In Pu, a quantitative financial engineer for Citadel, LLC was arrested for misappropriating proprietary trading strategies that he planned to use to develop his own hedge fund in China. In October 2011, Congress proposed an amendment to §1836 of the EEA that would create a private right of action for companies for trade secret theft under §1832. If the amendment is passed, federal prosecution of trade secret theft under the EEA would become a more readily available option of enforcement for companies.

Additionally, two cases, United States v. Chung and United States v. Huang, were brought under the §1831 of the EEA, a provision that criminalizes misappropriation of trade secrets for the benefit of a foreign government. This section of the law has been rarely used since the EEA was enacted fifteen years ago. In Chung, a Boeing employee faced charges for stealing and distributing Boeing technical documents by hiding them between pages of Chinese newspapers that he left out for trash collection. And most recently, a defendant in Huang pled guilty to exporting $300 million worth of stolen trade secrets to China and Germany and was sentenced to seven years and three months in prison.

This series of EEA prosecutions invites speculation as to why there has been an uptick in enforcement against trade secret theft and why most defendants have been Chinese individuals. In October 2011, the Office of the National Counterintelligence Executive published a report to Congress that identifies the Chinese as being the “world’s most active and persistent perpetrators of economic espionage.” The report does not explicitly state that the rise of EEA prosecutions against Chinese individuals is correlated to reducing or countering a “pervasive threat” of economic espionage. However, the content of the report suggests that trade secret theft, or economic espionage, most likely has become a priority for U.S. Attorneys.

Likewise, U.S. Attorneys have also attended and monitored the civil litigation Oracle Corporation v. SAP AG in which Oracle alleged that that a SAP subsidiary downloaded and copied without authorization Oracle’s software. Following the jury’s $1.3 billion judgment against SAP, the U.S. Attorneys then charged SAP with eleven counts of unauthorized access to an Oracle computer in violation of the CFAA.

It is also important to note that criminal prosecution is not the only area where federal trade secret protection is expanding. In TianRui Group Company, Ltd. v. International Trade Commission, the Federal Circuit held that the United States International Trade Commission has the authority, pursuant to §337 of the Tariff Act of 1930, to ban importation of goods manufactured using “unfair methods of competition,” including misappropriation of trade secrets, where the importation could harm a domestic company.