Private Election Companies Should Have Benefit of Trade Secrets

By Paul Holly
November 5, 2013

EDITOR’S NOTE: This is part 3 of a 3 part series. Paul Holly was a student of mine at JMLS during the Summer 2013 term. This article was originally written as a Note for the John Marshall Review of Intellectual Property Law (RIPL). To read part 1 please see Private Companies in Government Elections. To read part 2 please see Trade Secret Policy and Election Companies.

Paul Holly is currently a student at John Marshall Law School in Chicago, Illinois.

Elections are fundamental to the American style of government.[i]  Democracy requires the participation of the people and much of that participation takes place in the voting booth.[ii]  In order to foster and maintain public confidence in the election process, the equipment used by voters to carry out their democratic function must be reliable and trustworthy.[iii]  Many commentators have suggested that a voting infrastructure that uses private companies, each possessing the ability to maintain trade secrets, is contrary to the goal of having reliable and trustworthy equipment.[iv] 

Trade secret protection is just one form of protection that a company can use to protect its intellectual property, but it can prove to be an important one.[v]  The increasing reliance on intangible intellectual property, rather than physical assets as a means to maintain competitiveness in the marketplace, has increased the importance of trade secret protection.[vi]  Some commentators have suggested that the policy reasons for trade secret protection are outweighed by more important considerations when it comes to public infrastructure, such as election equipment.[vii]  Importantly, to exempt election equipment from trade secret protection would require significant changes to the FOIA, the UTSA, or both.[viii]

Trade Secret Policy Should Not Be Altered

The general value of trade secret protection, perhaps taken for granted in less scrutinized trades, also applies to the private election equipment industry.[ix]  The private election companies that create election equipment and software are in competition with other companies supplying their own versions.[x]  Trade secret protection provides incentives to put effort and capital into product development, product innovation, and advances in procedure and industry innovation.[xi]  There are less incentives to do this, however, when competitors can appropriate the benefit of the work as soon as it is released.[xii]  Those companies investing in computer source code development particularly benefit from trade secret protection.[xiii]

Furthermore, patents are not a viable substitute for the protection that is provided by trade secret status.[xiv]  Trade secrets have the benefit of never expiring, while patent protection lasts at most twenty years from the date of filing.[xv]  While the election industry can benefit from new product innovation, the core functionality of what must be accomplished is based on election procedure and procedure, based on law, can remain unchanged for indefinite periods of time.  Those parts that do change, however, would require new patent protection for each advance, imposing significant prosecution and perhaps litigation costs on the development process.[xvi]

No Change to FOIA 

Any citizen or business in the United States can make a FOIA request.[xvii]  However, there are some classes of information available to the government that Congress has decided should not be available through a FOIA request.[xviii]  The exemption that protects election companies is the trade secret exemption which covers commercial trade secrets that are in the possession of the government for various reasons.[xix]

The FOIA has been amended and altered since it was first enacted and could of course be amended in the future.[xx]  Some commentators believe that it would be desirable to eliminate the exemption for commercial trade secrets in order to have a more transparent government.[xxi]  However, there are desirable advantages to both private companies and the government from this exemption that make it important to keep in place.[xxii]  The exemption encourages companies to submit their required commercial information without reservation, and gives the government assurances that the information will be reliable.[xxiii]  This is important, because some states require the archiving of source code for any election equipment used within the state.[xxiv]  Without the exemption election companies would have no incentive to provide those states with the opportunity to use the newest and most improved election products.[xxv]

No change to UTSA 

Under the UTSA, which has been adopted wholly or substantially by most states, the computer software running on election equipment would qualify for trade secret protection as a program that provides “independent economic value”.[xxvi]  Removal of the trade secret protection for election companies from the UTSA would require either drastic changes to commercial trade secrets in general, or a specific exemption for companies providing services and equipment to state governments.

It is not advisable for a state government to create an exemption specific to companies providing services and equipment to state governments.[xxvii]  A private company providing contracting services to such a state government would lose the trade secret status of its intellectual property for any equipment bid to that state.  Such equipment would also likely be used in other states and would provide a considerable competitive disadvantage by revealing hardware and software design to competitors.[xxviii]  The company would likely respond by simply not contracting with that state or possibly by providing older, inferior equipment.[xxix]  Considerable value would be lost to the state by not having the most modern, easiest to use, fastest, and more reliable equipment.[xxx]

Election Equipment Solutions Containing No Trade Secrets

Election equipment companies are currently private companies that bid on state government contracts to provide hardware, software, and support for elections.[xxxi]  However, the need for trade secrecy would be less critical if the government itself provided the election equipment.[xxxii]

The Government Would Have Less of a Need For Trade Secrets

While equipment commissioned or created by state governments could potentially contain trade secrecy there would be less incentive for a government to try to maintain trade secrecy.[xxxiii]  Without competitors to consider, many of the desirable competitive advantages provided by trade secret protection would be inapposite.[xxxiv]

Open Source Software Could be Used 

A government-created election system could maintain complete transparency by using only open source software in the election hardware.[xxxv]  Open source software would allow anyone to request and examine the source code that is running on the system.[xxxvi]  While there are potentially security problems with such openness such as easy access to the source for virus creators, it would certainly meet the principles of an open, transparent government.[xxxvii]

Conclusion

Elections are fundamental to our style of government and it is important to have faith in the equipment that is counting and recording the votes.  Therefore it is potentially outrageous that election equipment and the source code running on it could be unavailable for inspection due to an invocation of trade secret status.  However, as long as election equipment is provided by private companies bidding on state government contracts to provide election hardware and support, trade secret protection must remain in place for these companies so they can remain innovative and competitive.  Thus, if the desire for transparency in government is determined to be important enough to forbid trade secrecy in this area, the only other available and viable approach is to use government created equipment running open source software.

 


[i] See generally Joshua A. Douglas, ARTICLE: Is the Right to Vote Really Fundamental?, 18 Cornell J.L. & Pub. Pol’y 143 (2007) (discussing how, surprisingly, the constitutional right to vote is not always a fundamental right and that states have the right to regulate elections but stating that “voting represents the epitome of self-governance”).

[ii] Id. at 144—145 (discussing surveys of Americans showing they consider the right to vote one of the most valued under the Constitution and stating that “the right to vote is part of our ethos for what it means to be an American”).

[iii] See Tokaji supra note 20 at 1729 (discussing the suits filed by voting rights activists in several states that relied on the Bush v. Gore decision seeking the replacement of antiquated voting systems).

[iv] See generally Levine, supra note 35. Mr. Levine illustrates several examples where trade secrecy prevents the public from evaluating the actions of the government including a voting equipment example and proposing possible solutions to the problem of government trade secrets including the elimination of FOIA exemption for commercial trade secrets.  Id.  See Levine, supra note 67 (where the same author in a different article states that there should be public disclosure of trade secrets when private companies provide what can be considered to be public infrastructure);  See Massey, supra note 98 (discussing how electronic voting  methods cannot be trusted due to proprietary code and that these systems should be replaced with those using open source software).

[v] See Levine, supra note 74 at 139 (discussing how trade secrets are a vitally important business practice for product innovation with an example of a study showing that between the early 1980s and mid 1990s the use of trade secrecy had “increased dramatically”).

[vi] See David S. Almeling et al, ARTICLE: A Statistical Analysis of Trade Secret Litigation in Federal Courts, 45 Gonz. L. Rev. 291, 304 (2010) (noting that trade secrecy is a “good form of protection for rapidly evolving technologies that can outpace the evolution of other IP laws”);  Evans, supra note 101 at 320 (stating that the most common form of protection for source code are copyrights and trade secrets when the distribution takes place only in binary form).

[vii] See generally Levine, supra note 35 (arguing that any time it appears that government infrastructure contains trade secrets it undermines the public interest of having a transparent and accountable government);  Massey, supra note 98 (arguing in the article that proprietary source code should not be used in election equipment and advocating the use of open source code instead).

[viii] See Levine, supra note 35 at 107 (presenting as one of three solutions to the “problem of government trade secrets” to clarify freedom of information laws in the state to not government trade secrets as an exemption to FOIA requests).  Mr. Levine argues that trade secrecy law, such as the UTSA, was not developed with government trade secrets in mind.  Id. at 77.  Reddix-Smalls, supra note 16 at 763 (stating that intellectual property rights to voting machines results in private control of a “fundamental liberty interest” with earlier examples using game theory).

[ix] See Nou supra note 19 at 749 (discussing how elections are administered by private companies);  Tokaji supra note 20 at 1754.  Mr. Tojaki discusses research demonstrating the benefits of maintaining development in voting equipment to reduce the number of uncounted votes, reducing the “racial gap” in uncounted votes, and decreasing the incidence of residual votes.  Id.

[x] See Nou supra note 19 at 766 (noting that after the HAVA act four election companies dominated but at last nineteen vendors were competing for multi-million dollar state and local contracts).

[xi] See Risch supra note 79 at 8 (stating that the existence of trade secrets creates increased incentive for a company and that trade secrets enhance the marginal benefits of society).

[xii] See Thomson supra note 102 at 290.  “Without the availability of trade secret protection, the use and application of fruitful knowledge might not be as freely employed by trade secret holders as it would otherwise be out of fear that they could lose the benefits of their efforts”.  Id.  Risch supra note 79 at 39.  Mr Risch while arguing earlier in the article that trade secrets do not create as much incentive to innovate as other types of intellectual property, concedes that any rule requiring a “forced disclosure” of secrets would nevertheless cause there to be a smaller return on investment for developing valuable information and therefore might be less likely to develop such information, with software source code as a specific example.  Id.

[xiii] Id.  (stating rules that source code be distributed with its software would have an impact on incentive to innovate);  See generally Thomson supra note 102 (discussing how trade secret protection was the primary method for ensuring that the code of software vendors was not misappropriated before the development of patent and copyright law as viable alternatives).

[xiv] See Mark A. Lemely, ARTICLE: The Surprising Virtues of Treating Trade Secrets as IP Rights, 61 Stan. L. Rev. 311, 331 (2008) (stating that trade secret law reaches “areas where patent law does not reach” and the additional incentive provided is important for innovation and patent applications being time consuming and expensive).

[xv] Id. at 332.  Not only does a patent expire after twenty years, but before that time, scientists can learn from the patent disclosure and use that information to improve on the invention or design around it.  Id.

[xvi] Id. at 331 (describing how applying for patent protection can take time, significant paperwork, and be expensive).

[xvii] See Levine, supra note 35 at 78 (stating that the FOIA permits a citizen or business to request information from the government as a result of “increased interest in allowing investigative journalism” in the 1960s).

[xviii] 3—12 Milgrim, supra note 50, § 12.03 (describing the exemptions that have been built into the FOIA).

[xix] Id.  Exemption four to the FOIA covering commercial trade secrets “explicitly exempts from application of the FOIA any matters that were ‘trade secrets and commercial or financial information obtained from a person and privileged and confidential’”.  Id.

[xx] Id.  Milgrim being relevant to our purposes by discussing an amendment in 1976 to the third exemption limiting the statutes to which it applies and showing that the exemptions are not safe from amendment.  Id.

[xxi] See generally Levine, supra note 35 (stating that if there are trade secrets in government architecture there is undermining of a transparent and accountable government);  Nou supra note 19 at 779.  Nou advocating a clause in all government contracts to election companies that “would require that the technology and software used in all voting machines would be transparent and available for inspection”.  Id.  Massey, supra note 98 at 241 (stating that proprietary code undermines transparent and accountable government).

[xxii] 3—12 Milgrim, supra note 50, § 12.03.  Milgrim describing in reference to private companies that “[p]roprietors of confidential information” are more likely to cooperate with federal agencies in an amicable fashion if the cooperation does not cause substantial competitive harm and that it is in the government agency’s interest to have smooth functioning.  Id.

[xxiii] Id.  (discussing the desire for the agency to be able to obtain further information efficiently).

[xxiv] See Cal Elec Code § 19103 (as an example of a state, in this case California, requiring the depositing of the source code of any newly approved voting system to be deposited in an approved escrow facility).

[xxv] 3—12 Milgrim, supra note 50, § 12.03 (stating that it is more likely for private companies to cooperate if it does not cause a competitive disadvantage through loss of trade secrets).

[xxvi] See Thomson supra note 102 at 298.  “It is well established that computer software can avail itself of the protection provided by trade secrets”.  Id.

[xxvii] 3—12 Milgrim, supra note 50, § 12.03.  Milgrim stating proprietors of confidential information are more likely to cooperate with federal agencies in an amicable fashion if the cooperation does not cause substantial competitive harm and that it is in the government agency’s interest to have smooth functioning.  Id.

[xxviii] See Nou supra note 19 at 766 (noting that after the HAVA act, four election companies dominated providing election systems and services to the states).

[xxix] 3—12 Milgrim, supra note 50, § 12.03 (discussing how companies with confidential information do not want to cause themselves competitive harm).

[xxx] See Massey, supra note 98 at 236.  “Secure,

reliable and fair elections are essential to American democracy, and should be in the interest of the general public independent of ideology or political affiliations”.  Id.

[xxxi] See Nou supra note 19 at 766 (noting that four private companies dominated election system services).

[xxxii] See Levine, supra note 35 at 64.  Levine generally arguing that a government trade secret should be a “contradiction in terms” and “democratic values like transparency and accountability should eclipse whatever arguable economic benefit a government receives from maintaining the alleged trade secret”.  Id.

[xxxiii] Id. at 73 (stating “governments need no incentive from the market to serve the public, and selling a product (and generating a profit) is not the primary reason that governments exist”).

[xxxiv] Id. at 95.  “[T]rade secrecy law does not fit well when the entity claiming the trade secret is a public body, especially one that has no competitors and relies on taxpayer funding to survive”.  Id.

[xxxv] See Evans, supra note 101 at 322 (describing open source as software where the source code is publicly available and further describing the licenses that can be used to make code open source).

[xxxvi] Id.

[xxxvii] Shawn W. Potter, Opening Up to Open Source, 6 RICH. J.L. & TECH. 24, 24 (Spring 2000).  Open source software is vulnerable to viruses since “malefactors” can easily view the code, but this is somewhat mitigated by there being more people who can view the code and safeguard against such attacks.  Id.

The Author

Paul Holly

Paul Holly

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 2 Comments comments.

  1. John Nagle, Silicon Valley, CA November 12, 2013 1:28 am

    Election companies are entitled to trade secrets. But not customers. If their customers, who are typically states, choose to refuse to deal with election companies which keep their technology secret, they have the right to do so. States can also prohibit the use of election devices where the technology is not disclosed for auditing.

    The model for regulation should be the Nevada Gaming Commission’s rules on gaming devices. They have an absolute right to examine the internals of any gaming device used in the state and routinely do so. If how your gaming machine works is a trade secret, it can’t be use for gaming in Nevada. So there.

    Realistically, election companies have no trade secrets of significant value anyway, other than that their software quality is very poor.

  2. Kevin November 15, 2013 8:16 pm

    Some points presented in this series of articles were clearly made by a a non-software engineer.

    Notably, your solution stresses “security through obscurity” that not permitting the public to examine the source code will make the software more secure and that conversely having open source software would be insecure. Multiple research articles on this topic have concluded that this is simply not true.

    Moreover, when the general public is being asked to place their trust in the accuracy of a system, the public has a right to examine how that system works. This is why a court required a breath-a-lyzer company to reveal its source code. I believe when pressed with an election fraud claim, a subsequent court would be compelled to do the same.

    Finally, I certainly would object to my district ever adopting a computer voting system with a closed source software. I suspect many others would as well.