Imagine you are a small business owner who wakes up one day to find a former employee, customer, supplier, or consultant has started a competing business that offers products and services that look remarkably like yours. Maybe you are a brewer whose IPA is now on tap at the competition, or perhaps you are a manufacturer who spent years developing a special technique that is now being used or marketed by a new competing business.
After the initial shock, you might suspect your trade secrets had been stolen, and after calling your lawyer, you would find out one of your only remedies would be to seek redress in state or federal court.
For thousands of businesses in America, this is not a hypothetical situation. According to the legal research organization Lex Machinia, more than 1,000 cases involving trade secret theft are filed in U.S. courts every year.
While many experts attribute the increase in litigation to bi-partisan legislation passed by Congress in 2016, others have suggested it is a problem that warrants the attention of policy makers in state capitols and Washington, DC. As a small business owner, I urge legislators to ignore these calls. Any changes that weaken trade secret protections would be a mistake.
Trade secrets are a type of intellectual property. They are traditionally thought of as confidential information that gives a business a leg up on its competition. Trade secrets can be a recipe, a list, data set or a technique. Famous examples of trade secrets include the recipe for Coca-Cola, the algorithm that guides Google’s search results and the formula the New York Times uses to determine what books make its best seller list.
As the owner of a manufacturing business, my company has a number of trade secrets, and we take great care to protect them. But even the largest companies in the world with their armies of lawyers and layers of security find themselves victims of trade secret theft. In these cases, the courts play a strong role.
In 2007, for example, an executive assistant at Coca-Cola was sent to prison for attempting to steal a recipe and sell it to rival Pepsi. More recently, Uber settled a case with its competitor, Waymo, for $245 million. In another high-profile case, Texas-based real estate company HouseCanary was awarded more than $700 million after a jury unanimously concluded that one of the Quicken Loans family of companies, Title Source (now Amrock), fraudulently stole its data and methods.
In the HouseCanary case, the jury reached an easy decision, and the outcome of the case sends a clear message: trade secret theft will be punished, often severely. As a businessman who plays by the rules, I believe this message is important and protections that allow businesses to defend their trade secrets in court must remain strong.
Preserving the ability to seek relief for trade secret theft is not just about protecting businesses like mine. It is also about protecting the U.S. economy. Strong trade secret laws incentivize businesses to compete, not just copy each other. These laws encourage innovation. Making it harder to protect trade secrets would make me less likely to take economic risks that create jobs and contribute to the growth of my community.
Like all business owners, I hope to never wake up one day and learn my trade secrets have been stolen, but if I do, I am glad there are strong laws to protect me.