Congress expected to take up federal trade secret legislation in 2015

By Gene Quinn
February 16, 2015

capitol-building-dec-2012-gqIn addition to being a patent litigator and diplomat, Jim Pooley is an expert on trade secrets. He wrote a book on the subject in 1982, and will soon release a dramatically updated version that will address both U.S. and international trade secret laws.

I caught up with Pooley for an interview on January 22, 2015. What follows is the finale segment of our conversations, which is largely devoted to trade secrets and the likelihood of Congressional action on the subject during the 114th Congress. We also touch on what Pooley has in store professional moving forward.

To begin reading the interview from the beginning please see Harmonization and the question for the elusive grace period.

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QUINN: Now, you mentioned trade secrets in your answer just a little bit ago. And I understand you’re working on a trade secret book. And I was wondering if you could tell us a little bit about that. Is that going to cover U.S. domestic law or is it going to cover international law?

POOLEY: Well, it’s going to cover both. It’s a bottom up rewrite of a book that I first published in 1982, believe it or not. A book for business people that describes how trade secrets work. This one is going to have a lot more international heft to it but the major difference, and the reason that I’m rewriting it, is that since 1982 a little thing called the internet happened. And that has massively changed how we manage and exploit secrets in global markets. So it has to address the international scene to a large extent. Now that said, I don’t think it would surprise anyone to hear that the most developed and effective trade secret law in the world is in the U.S. And so understanding how it works here, even with some variations among the States, what we’ve learned with almost 200 years of common law development is instructive to a lot of other jurisdictions that are struggling with relatively new trade secret regimes.

QUINN: It’s good to hear you say that because we do have 50 different laboratories in the U.S. that go into making up trade secret law. And do we have a trade secret statute in all 50 states now? I don’t think we do. Do we?

POOLEY: There are trade secret statutes of one sort or another you’ll find in every state. The Uniform Trade Secrets Act still needs three more states to chime in. And there are more variations in that statute than there are for example in the Uniform Commercial Code from one state to another. But they’re not overwhelming. And by and large even though some things are expressed a little bit differently from one state to another, the actual effect is not that different. We are more or less uniform even though each state gets to decide on its own version of the Act.

QUINN: Now I’ve heard some rumblings that there may be some federal trade secret legislation that will move during the next congress. Have you heard anything about that?

POOLEY: Yes, and of course there was a lot of action on this in the last Congress. And you know, it’s interesting that when the Economic Espionage Act was first introduced in 1996 it moved very quickly through Congress. There were people at the time that said well why don’t we just make this both a criminal and civil statute and provide another tool. And I remember at the time people saying, well, you know that adding a civil claim would be too heavy a political lift because we will run into opposition from the federal judges who don’t want to take on extra issues as part of their original jurisdiction. I don’t think that’s the problem anymore. There is a group of law professors that have expressed some opposition to the proposal to add a civil remedy, in spite of widespread support among industry stakeholders. There was some controversy around some seizure provisions that were suggested in one version of the legislation. And I think those discussions will usefully inform what will be done in this Congress. But I believe there is a great deal of support for making that basic change to allow companies to have another—not a displacement, not preemptive of state law but an additional place to go to get the benefit of nationwide service of process and other special advantages of being in federal court.

QUINN: So it would be like the equivalent of trademarks for example, where you have jurisdiction at the state level and at the federal level.

POOLEY: Yes. Some people have expressed concern that the states need to preserve different policy options. And they hold up California as a good example of that. Even though its version of the Uniform Trade Secrets Act is more or less the same as others we all know that in California the law on covenants not to compete is very different than in most other states. But that part of its law would not be touched by any of this federal legislation. And so when it comes to employee mobility and those sorts of issues I believe the states would remain free to experiment.

QUINN: I think it makes sense. I mean one part of me says we’ve got this almost universal buy-in, as you were talking about before, where the laws really aren’t all that different. Yes, they’re different around the edges and there may be some differences, but largely I think most cases would come out the same in whatever state they’re going to be decided. So do we really need federal trade secret legislation? But the other side it seems to me that we’re not talking about a national economy any more, we’re talking about a global economy.

POOLEY: Right.

QUINN: And it’s a little bit odd that we don’t have a national trade secret law in this global economy.

POOLEY: Yes. And I think as a practical matter a lot of companies view this as having the ability to go into a court system that is used to dealing with cross border disputes. Federal judges know how to handle international cases, or cases that involve actions that have taken place outside the U.S. with effects felt inside the U.S. And they know how to handle international discovery issues perhaps a bit better because they’ve had more experience with it than some state courts. It’s not to say that you can’t get good relief in many state courts but I can’t see a very good reason not to have the additional alternative available of going into federal court and using that system particularly as you say because a lot of the issues that we have to face these days are international in scope.

QUINN: And particularly in this area. Now with the Sony hack and all the issues with cyber security and data breaches and everything, that’s only going to get worse. And it seems to me that the proper place for American companies to seek relief would be in an Article III court at the federal level.

POOLEY: I would say they ought to have that choice. And, yes, the issue is not just at the litigation level but at the general strategic level, for example how do you control your R&D facilities? How do you control your global supply-chain relationships where you often do a lot of co-engineering? How do you enforceably trust these partners that you have scattered all over the globe when you’re dealing with products that have shorter and shorter life cycles? It’s something where we have to think very hard about the array of tools that need to be available to the modern enterprise to address those issues both at the strategic level and when it comes to enforcement.   So I think it’s an issue that everybody needs to be thinking about very hard and I’m favorably inclined toward some action in Congress on a trade secret civil claim.

QUINN: Now, I know you know the patent industry inside and out and obviously you’ve literally written the book on trade secrets. You’ve seen the industry as a diplomat and you’ve seen it as a practitioner, and you’ve been living in Europe for the last five years and you’ve seen all that’s gone on there. What is it that you’re going to be doing moving forward? I can see you fitting into a lot of different spaces. I don’t know that it would be a lobbying space as much, although I could see you doing some of that. Or I could see you doing a lot of strategic business consulting particularly for multinational corporations or companies that want to aspire to be multinational corporations. Where do you see your practice going forward from here?

POOLEY: Well, thanks for asking, Gene. I have three things that I’m very interested in doing and where I think my experience can give me some special perspective. One of those you’ve mentioned which is formulating international IP strategies particularly when it comes to the patent/trade secret interface, something that’s much more dynamic now than it has been in the past. And so I’m looking forward to working with clients to help formulate and reexamine those strategies. The second area relates specifically to trade secrets, for all the reasons we’ve already talked about. Information security is the issue. How do you handle this very important but vulnerable asset in a globalized market with fractured supply chains? So I hope to be working with some companies to help examine and design their information protection systems, particularly in cyber security where the risks are so great and constantly changing. And then the third area relates to my experience as a litigator and my interest in dispute resolution. So I can see myself helping with pre-litigation investigations and analysis. Review of ongoing litigation. Co-counseling as a specialist in patent and trade secret cases. And acting as an ADR neutral or special master.

QUINN: That’s what I was going to ask you. Because—and not specifically with respect to being a neutral, but I was thinking about mediation, because I’ve known you for a while and you strike me as an incredibly even-handed person who is extraordinary knowledgeable about all facets of our industry. It seems to me that you would be a great mediator.

POOLEY: Well, that’s very nice of you to say. I do intend to do that. In fact, I’m handling a mediation right now. But I’d like to contribute in a variety of ways. And quite frankly besides the things that we do to make a living I also want to remain very involved on the public policy side of things and engaged as a volunteer in organizations like IPO and AIPLA where we continue the struggle on the issues that you and I have been talking about here. So yes, in some ways I feel like a blind dog in a butcher shop, it’s hard to choose.

QUINN: You know, we get to a certain point in our careers and the way that you describe what it is that you do might just as well be described, at least in some respects as AFAB, you know, “anything for a buck.” I say that because you develop all these skills and they translate into so many different areas and it’ll be exciting to see which direction you go in. And I’ll tell you if at any point in time you ever write an op-ed or want to get your views out there you have have a welcome place at IPWatchdog. I’d love to publish what you’re working on and thinking about. So please keep that in mind.

POOLEY: Well, that’s very kind of you to say. I have to say, too, Gene, I think we’re all very, very lucky to be involved in the industry and the profession that we’re in. I think intellectual property is not just a hot item that’s exciting because of the froth around it. Yes it’s so dynamic that every transaction, every new issue is different. But quite frankly it’s the terrific people that we get to work with in this community that makes this profession so rewarding. And I think we all should feel pretty privileged for that.

QUINN: I do. You know, you go to these events and I just genuinely enjoy going to as many as I can. I can’t go to as many as I’d like to, but you look around and I agree, there are genuinely good people in our industry. And that extends to the innovators too. I know one year at the National Hall of Fame induction ceremony I was having dinner at the table with the gentleman who invented Prozac. There are just enormously accomplished individuals in our industry.

POOLEY: Klaus Schmiegel has a great sense of humor. He’s a wonderful fellow. And you know, I was active in the Hall for many years. One lovely story I’ll pass on here. Dave Kappos and I were sitting at a table with a man who was about to be recognized because his, either his father or his grandfather had invented the Phillips cross-head screw. He was from the Phillips Screw Company. And so we asked him, “So, wow, it’s been since the 30s that this innovation first appeared. Tell me, do you have any idea how many screws you have produced?” And the guy said, “Yeah, I do. Zero.” He said, “We realized early on that we couldn’t manufacture and sell these things ourselves. So from the very beginning we’ve licensed our patents to other companies to make the screws.” It was an interesting revelation.

QUINN: Because today they’d be a patent troll.

POOLEY: Exactly, exactly.

QUINN: It’s just amazing how that term has been so misused.

POOLEY: It has. But the point we were making is that we as a community of professionals get to hang out with some of the most interesting and creative people on the planet. And we’re very lucky to have that opportunity. I think that extends to us practitioners, too. I think if you compare IP to a lot of other areas of the law we have a very collegial bunch of people involved in this practice and that’s a very good thing.

QUINN: I agree. I enjoy it every day and I guess to some extent that makes me a geek. But you know, now over the last few years with the Big Bang Theory being so popular on TV, being a geek isn’t a bad thing anymore.

POOLEY: No, it’s a badge of honor.

QUINN: Well, Jim, I really appreciate you taking the time to chat with me. It’s been good to catch up and hopefully we’ll be able to do this periodically now that you are back in the private sector.

POOLEY: Thank you, Gene.

The Author

Gene Quinn

Gene Quinn is a Patent Attorney and Editor and President & CEO ofIPWatchdog, Inc.. Gene founded IPWatchdog.com in 1999. Gene is also a principal lecturer in the PLI Patent Bar Review Course and Of Counsel to the law firm of Berenato & White, LLC. Gene’s specialty is in the area of strategic patent consulting, patent application drafting and patent prosecution. He consults with attorneys facing peculiar procedural issues at the Patent Office, advises investors and executives on patent law changes and pending litigation matters, and works with start-up businesses throughout the United States and around the world, primarily dealing with software and computer related innovations. is admitted to practice law in New Hampshire, is a Registered Patent Attorney and is also admitted to practice before the United States Court of Appeals for the Federal Circuit. CLICK HERE to send Gene a message.

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 1 Comment comments.

  1. Stephen Y. Chow March 8, 2015 7:17 pm

    I don’t have a problem with a federal private right of action for trade secrets — limited to what’s covered by the Economic Espionage Act (theft and theft cognates). It’s unclear to me why there is bipartisan support for this when private rights of action have been shouted down for forty years and “troll” actions for the past ten.

    The problem is that the proposed legislation simply inserts into the Economic Espionage Act the Uniform Trade Secrets Act definition of “misappropriation” that turns on state-based notions of “improper acquisition” (against “commercial mores”), duty of confidentiality based on the state laws of agency, contracts, corporations, employment, trusts, etc., and unjust enrichment (restitution for “accidental” and “mistaken” acquisition) — without even a jurisdictional threshold (any secret “related to a product or service . . . intended for use in interstate . . . commerce”). This gives early litigants to establish national meanings for these terms (as the proponents of the legislation advocate), including whether privacy policies excuse as “proper” scraping of postings, sniffing of emails or reporting by cookies. The argument that this does not preempt the States is shallow, as the national standards mandated by Congress will likely be applied by the States as in the trademark law held out by proponents as an example. See also the FTC Act.