Tired: Insane Patent Verdicts; Wired: Insane Trade Secret Verdicts

from the stop-expanding-intellectual-property-law dept

There are so many issues related to what’s referred to (misleadingly, of course) as “intellectual property” that it’s difficult to cover them all. For a while I’d been meaning to write about the attempt to “raise up” trade secret law to the federal level and what kinds of problems that might cause. Professor Eric Goldman, not surprisingly, was covering this all along, noting that the Defend Trade Secrets Act from 2016 was the “biggest IP development in years” (even if Congress, in a little twist, made sure it was not officially an “intellectual property” law — which means that Section 230 immunity still applies).

Of course, it usually takes a few years for the real effects of new laws to be felt. In a fascinating, if troubling article, economist Ike Brannon, notes that we may be on the verge of a new raft of patent trolling-esque legal fights over loosely defined “trade secrets,” that have the potential to be much, much worse than patent trolling. At least with patent trolls, there’s an actual patent with actual definitions (even if they’re a mess) that can be looked at to see if there’s infringement. The world of trade secrets is a lot more murky.

Brannon points to a crazy recent case, involving a title insurance company Title Source (now Amrock) who sued a data analytics firm called HouseCanary over a claim that HouseCanary breached a contract the two companies had to deliver “an advanced, automated home valuation model.” HouseCanary countersued, claiming that Title Source used its proprietary trade secrets to develop its own home valuation model. As Brannon points out, most people thought little of these counterclaims… but a funny thing happened when it got to court:

At the time, HouseCanary?s claim appeared to be merely a tactical move with little basis in reality, but to the surprise of many a jury found in its favor in the countersuit and awarded it nearly three-quarters of a billion dollars. A judge recently upheld the jury?s award.

Several people questioned the jury?s rationale, and shortly after the verdict several former HouseCanary employees came forward to attest that what their company delivered to Amrock was of marginal value and contained no proprietary intellectual property or trade secrets that could have been stolen.

For instance, data on home sales and prices are publicly available and software that aggregates and collects it has been widely available for two decades; Redfin and Zillow each employ such software. What?s more, the alleged Amrock product at issue was never commercially sold or marketed.

The case is now being appealed, but as Brannon notes, thanks to the DTSA, suddenly there’s a wide open field of questionable trade secret claims that can be brought in federal court:

Unfortunately, it has become clear that the legislation did little to clear up these disputes. The scope of the damage awards in the the last few years and the recent spike in cases involving trade company secrets means that more companies should brace themselves for lawsuits.

It was not the intent of Congress to broaden the scope for such lawsuits when it enacted a more uniform approach to the trade secrets law. However, that does indeed appear to be occurring, and the HouseCanary verdict may very well serve as the (house)canary in the coal mine, serving to inform the market of the peril in the law.

This, of course, should not surprise anyone who’s spent literally any amount of time studying how other areas of so-called intellectual property have developed over the years. We’ve seen copyright trolling, patent trolling, and trademark trolling. There are even some examples that might be considered publicity rights trolling. So, of course, there’s going to be an increase in trade secret trolling, especially when you’re discussing an area of law that includes much more vague and amorphous “property” (note: not actual property) than copyrights or patents. And, of course, this is exactly what Professor Goldman predicted years ago, and supporters of the law brushed off.

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Companies: amrock, housecanary, title source

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Comments on “Tired: Insane Patent Verdicts; Wired: Insane Trade Secret Verdicts”

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Mason Wheeler (profile) says:

There are occasionally people around here who say we need to do away with copyright altogether. I don’t agree with them–when properly implemented, copyright serves a valuable purpose–but with stuff like this, I can understand. Because I think that trade secret protection needs to be done away with altogether.

Trade secrets were literally the problem that patents were invented to solve: as problematic as patents can be, at least they require publication so that something does not remain a secret that can be lost. So now that we have a patent system, why do we still also have trade secrets?

And when I’ve asked that question in the past, the only answers I’ve gotten that are even anywhere close to being valid is people saying that there are valid cases where things like a business’s customer list should be protected as trade secrets. While I agree that there are valid cases for protecting such information, it would be better classified as a privacy issue than a trade secret issue. So again, what valid reason is there for trade secrets to be a thing?

Bamboo Harvester (profile) says:

Re: Re:

I’m in agreement.

As to Copyright, Life plus five years, non-transferable should work fine. You can License your New Mouse to Disney for whatever you want, but five years after you die it goes Public Domain.

Which means Disney would take all measures, up to and including hiring mercenaries, to prevent that from ever happening.

As to Trade Secrets… that gets a bit "iffy". They’re not a description of "normally" patentable items. Decaffeinated coffee is a good example.

The process is quite involved, and requires liquid CO2. That original process was a trade secret. Couldn’t be patented at the time (might be now, the rules have changed), was very difficult, and the moment all the necessary "secrets" about it were exposed, every coffee business geared up to compete in that market.

There shouldn’t be any legal protections for Trade Secrets other than the obvious ones regarding actual theft or espionage. IIRC, Patent Law has changed to where you can now patent a "process", if it hasn’t it should.

Using your customer list example, no, the list itself isn’t a trade secret. The methodology used to collect, maintain, sort, and "rate" each name on the list could be. I don’t see any way the list itself could be considered a trade secret or how a Patent could be granted for one. I’m not sure how "illegal use" of a list is handled. If you rent a one-time use of that list AC keeps going on about, and then use it three times, you would be subject to a lawsuit over it. But not because it’s "protected" information, but because you’ve committed a contractual abuse.

That One Guy (profile) says:

Re: Re: Re:

As to Copyright, Life plus five years, non-transferable should work fine.

Even that seems to be highly excessive, as it means that anything created during your lifetime, unless the creator dies midway through, is going to be locked up and only available to the next generation for whom it’s likely to be much less important or relevant.

The original 14 years with an option to renew for another 14 might work, but based upon past articles talking about how the majority of profit from a work tends to come in the first few years even that might be excessive, such that a possible idea could be five years base, with say four or five optional extensions. If something is really important for someone it could be covered for up to 30 years, whereas if it’s not that big a deal it would be available to the public in 5 or 10.

Just a thought anyway, and of course there’s other considerations on stuff like registration, fair use and whatnot beyond that.

Bamboo Harvester (profile) says:

Re: Re: Re: Re:

re; life+5

I was thinking Royalties, especially in music and books.

On further reflection, the problem with "life" isn’t it’s varying length, but how would you handle a copyright created by a business.

So, yes, a fixed term would be best, but the number of renewals would have to be limited or we’d have the same Disney problem.

Say the average life expectancy in the US is 80 years. Setting the term of copyright to 10 years with a maximum of seven renewals would cover the same period.

k says:

Re: Re:

If contract law allows contracts to penalize disclosure of information, then trade secret cases are going to appear in court, and law to deal with those cases needs to exist.

When military technology that’s inherently unpatentable due to its secret nature became both extremely valuable/costly to develop, law needed to be developed to deal with it.

I don’t think the public interest has been sufficiently protected in the recent changes to the law, but there’s no dodging this issue.

Anonymous Anonymous Coward (profile) says:

Re: Re: Re:

Those sound like exceptions, rather than what is the rule. I don’t disagree that those exceptions should have some protection, but it appears that the way the law is , and is going to be used will do serious harm to some companies that don’t deserve it, and likely some serious harm to the economy, like patent and copyright trolling.

TKnarr (profile) says:

Re: Re:

I believe it was to cover situations where contractor X took confidential information while he was working for company A and handed it over to employee Y who worked for company B. X had a contract with A to not do that so A can definitely go after him for breach of that contract, but Y doesn’t have any contract with A so on what grounds can A go after him? Trade secret protection was originally to make it clear that if Y knows X is bound to keep the information confidential then Y (and by extension B) can’t wiggle out of being held liable right along with X. It was originally limited to "knew, or reasonably should have known that the information/items were in fact covered by confidentiality agreements".

The problem is that over years it’s gone from that to "should have assumed the originator would have wanted them covered even absent any evidence", which has led to Y being held liable even if he’d never had any contact with X and X had just forgot to pick up the prototype hardware from the table before leaving the restaurant. Under the original interpretation Y would be in the clear since he’s got no evidence the items actually are covered by a confidentiality agreement (he doesn’t know who left it so he can’t know they’d normally have signed such an agreement, as opposed to the case where Y knew the item came from X who as an employee would have to have signed confidentiality agreements). It’s that extension that’s become the problem, not the original idea.

TKnarr (profile) says:

Re: Re: Re:

NB: originally the concept also included the provision that company A had taken all appropriate steps to keep the information/items secret, including confidentiality agreements and measures to physically restrict access to the material so it didn’t wander off. If it hadn’t, then it was out of luck on protection. That’s another factor that’s gotten slowly written out by the courts when it shouldn’t have been.

Anonymous Coward says:

Re: Re:

I really love this site. It is seldom that people are unembarassed enough to post really stupid and uninformed opinions in public, albeit those people here never use their own names or stand behind their stupidity. The combination of the faux bravery and obvious cowardice is entertaining.

The USA has over 200 years of success, attracting talent and supporting businesses from all over the world. One of the primary reasons more business is done here than anywhere else is because of the laws protecting intellectual property. Anyone with any experience in business understands that, and any educated person would immediately recognize that as historical fact.

I have personally started and sold multiple businesses, and run into the issues you describe, patent and trade secret law, multiple times and as both litigator and litigatee. Patent law is important, trade secret law is important. It is important to every business that invests in intellectual property.

What you really seem to rail against here are high awards from a jury. Big companies don’t like that. They are vulnerable to high awards because they have a lot of money. So, they pay for idiots like you to write stupid articles and supply stupid comments based on no education, no consideration, and an over abundance of stupidity. Paid Corporatists.

Why don’t you all goto China, or go to Russia, and write about the law there. You might find a warmer reception for your fanatical uneducated bullshit. Or maybe not. Give it a go.

Gary (profile) says:

Re: Re: Re:

people here never use their own names or stand behind their stupidity

Says the bulshit AC claiming to be an important business man with important experience we wouldn’t understand.

Then falsely claiming that TD readers are pro-big-business, because we never miss an opportunity to criticize monopolists.

Oh, then anyone that doesn’t love oprossive copyright is a commie! Love it! Ya go my "LOL" vote important business person!!

Anonymous Coward says:

Re: Re: Re: Re:

I was talking about Techdirt writers, like you. Not readers. Oh wait, are there any readers? I’m not sure about that. The voices here are so uniform and in such rabid agreement that it is hard to believe they are anything other than a few actual people posing as people they re not. One after another, with phony profiles, phony backgrounds, phony ponies that they ride in to act like a crowd when in fact it’s probably all just Mike himself or people he pays directly.

I do admire MIke, though, he’s got guts. He reminds me of Adam Schiff – totally uncaring about how ridiculous and dishonest he looks in front of the whole world.

Anonymous Coward says:

Re: Re: Your bulb seems pretty dim though

“I really love this site. It is seldom that people are unembarassed enough to post really stupid and uninformed opinions in public, albeit those people here never use their own names or stand behind their stupidity. The combination of the faux bravery and obvious cowardice is entertaining.”

I love people who project so hard we could use them as replacement bulbs at the Luxor in Vegas.

Sok Puppette (profile) says:

Re: Re: Re:

Oh my god, you’re serious. Let me laugh even harder.

200 years? The whole US industrial base was built in the 19th century by systematically ignoring European patents… which anybody remotely qualified to have an opinion would know.

The big reason business is done in the US is that the US was relatively undamaged in the two world wars of the 20th century, and parlayed that into economic centrality and imperial status. As anybody remotely qualified to have an opinion would know.

During the consolidation of that dominant position, US patent law enforced a far more rigorous standard of novelty and non-obviousness than it presently does. Most of the US’ dominance came during a period in which the standard for a patent was literally articulated as "flash of genius" rather than "not obvious to a person of ordinary skill in the art". Patents were much harder to get. As anybody remotely qualified to have an opinion.

Unfortunatly, stupid and uninformed people don’t know those things and still feel free to act superior.

You are of course correct that the present regime forces businesses to cling to both patents and trade secrets. If your competitor gets an artificial advantage and you don’t take that advantage yourself, then obviously you’re much more likely to fail. That doesn’t imply that it’s a problem to remove the artificial advantage from everybody.

MikeVx (profile) says:

Copyright duration and such.

The system needs revision. Copyright should not be automatic. Registration should be required. A system of registries should be created, Small fees charged would support the registries. Any term over 14 years should be right out.

An absolute requirement of registration should be depositing with the registry a suitable-for-distribution electronic copy of the registered work, which the registry is to make available to the public on expiration of the registration term. Text works would be simple, plain text or open formats lke ODT, audio and video works would be provided in high-resolution patent-free formats.

Registries would need to keep records, cross-filed with all other registries, of copyrights registered. The cross-filing would be to prevent record falsification by the use of registry-managed time-stamps. Records would be time-stamped on arrival from other registries. Too large a difference spells trouble.

There are lots of fiddly issues that would need to be addressed, but the basics listed here would be a good start.

Anonymous Coward says:

Re: Copyright duration and such.

You are an idiot, posing as a scholar. You are advocating for no coca-cola after 14 years, for example. How stupid is that? No KFC, no Big Mac special sauce.

Only two things are infinite, the universe and human stupidity. And I’m not sure about the former.

Anonymous Anonymous Coward (profile) says:

Re: Re: Copyright duration and such.

I hate to let Mickey D’s secret out (I have never worked for them not has anyone there leaked anything to me, I figured this out on my own) but I will. Their special sauce is 1 tablespoon of sweet pickle relish mixed with about 1/2 cup of mayonnaise. Those proportions might be off a tiny bit, but that mixture would satisfy anyone with a ‘special sauce’ jones.

Gary (profile) says:

Re: Re: Re: Copyright duration and such.

Yup, without trade secrets no one could just make hamburgers AAC. Guess you’ve just shut down McD’s forever. Next up – Coke is sugar water with ingredients clearly listed on the can. Anyone can make it as long as they don’t call it Coca-Cola.

Seriously – what kind of idiot AC can claim with a straight face that Coke production is in any way tied to copyright?

It’s also a straight up myth that there is a "secret recipe" for Coke and KFC. 7 ingredients, locked in a vault? It’s a krap recipe, the original owner is on record as saying so.

Anonymous Coward says:

Re: Re: Re:2 Copyright duration and such.

Ok – let me guess – you are another globalist nameless pauper that wants to teach citizens of the richest country in the world how to behave according to your new standards. You have no experience, no background, no knowledge of history or business or law, but you are ready to lecture the rest of us (rich successful Americans) with your new ideas about how to structure our society and manage our businesses.

Does that sound about right?

Anonymous Coward says:

Re: Copyright duration and such.

One thing that is difficult to discern about this site is or what people are advocating for. Are you advocating about US copyright law, or European, or Russian? Or all of them, are you a globalist that is ready to change the entire world to fit your imagine of what you think? Do you know anything about the system you are advocating to change? Do you have any education or experience?

Anonymous Anonymous Coward (profile) says:

Re: Re: Copyright duration and such.

Why not go global, after all DIsney did? They also got the USTR to implore (aka force) the rest of the world to go along with their ridiculous concept of what is a fair length for copyright. The fact that the original terms had been working well for over 100 years (in the US, and longer elsewhere) had no bearing on what Sonny Bono did at the behest of the MAFFIAA.

Anonymous Coward says:

Most commenting on this subject are obviously not well versed on the subject of trade secret law. As a consequence most comments miss the mark.

Perhaps perusing the following will help them better understand the various concepts underlying trade secrets.


Anonymous Coward says:

Re: Re: Re:

Here are some of things I remember from my trade secret litigation:

You have to tell the jury what the secret actually was
You have to explain to the jury how you protected it
You have to show the jury how much the secret was worth
You have to prove to the jury that the secret was not already well known
You have to show that your opponent had access to your trade secret, and unlawfully took it
You have to do all this while facing direct arguments from the other side that none of it is true

It seems in this case, the trade secret holder did all that, and convinced the jury of a large award. Did we see the evidence? I don’t think so. Did we hear the arguments, on both sides? I don’t think so. Are the people here impartial? I don’t think so.

So instead of relying on the reasonable opinions and conclusions of 12 disinterested parties when faced with the best arguments that can be found, on both sides, you say the law is wrong and the result is wrong and you know better. You’re saying that our system of justice is without merit because .. uh .. why again? What’s wrong with our system? You don’t like it because you want to back the idiot in this fight.

I and I say the idiot because only an idiot would a case like this go to trial. They (I am sure) had a hundred opportunities to settle the case, but chose not to. So now they have this huge penalty to pay for their bad behavior, but I’m sure will delay payment with an appeal. And, in the meantime, pay Techdirt to advocate on their behalf.

Advocating on behalf of dishonest idiots, that should be Techdirt’s slogan.

Rocky says:

Re: Re: Re: Re:

It seems you really didn’t read the article and the referenced links, which is on par for someone with an ax to grind.

Which kind of makes you the dishonest party, especially considering that your conclusions has almost zero correlation to what was said in the article.

Perhaps you should read the originating article written by Ike Brannon over at Forbes instead of coming with baseless accusations.

Anonymous Coward says:

Re: Re: Re:2 Re:

You mean baseless allegations like an impartial jury already decided this case, and their opinion is likely the most valid one, since they actually heard both sides and made their determination.

Or do you men baseless allegations like Russian Collusion?

When confronted with the facts, whether it be fully completed court cases or fully completed investigations, leftists can always find a way to try to twist reality into something it is not. You colluded with the Russian! Oh wait, you didn’t. Well, you tried to obstruct the investigation about colluding with the Russian, which concluded that you didn’t collude with the Russians! Oh wait, the investigation completed without inference. Well, you THOUGHT about interfering, or someone said you thought about you might interfere (which you never did) but you are GUILTY OF A THOUGHT CRIME! Yeah, that’s it. SOMEONE SAID YOU THOUGHT ABOUT IT, so GET OUT OF OFFICE!

The modern left.

No collusion. No obstruction. Or in this case, a fully valid jury verdict, reached by American Citizens in an American court about trade secrets. But no, if you’re on the left, that’s not what it is at all. Deny the facts, deny the results, make up some new shit and keep on spreading it far and wide.

Who are you again? Another fucking foreigner telling Americans what’s right and what’s wrong? Or are you just Mike in disguise? Do you know anything about trade secret litigation? Have you ever been litigation? Can you spell litigation?

Welcome to the modern Internet, my friends. Filled with ridiculous child-like hypocrisy on a global scale from nameless soulless inexperienced uneducated idiots, speaking with complete certainty.

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