The Role of Trade Secrets in Innovation Policy (CRS Report for Congress)
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| Release Date |
Revised Jan. 15, 2014 |
| Report Number |
R41391 |
| Report Type |
Report |
| Authors |
John R. Thomas, Visiting Scholar |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Premium Aug. 31, 2010 (18 pages, $24.95)
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Summary:
Many businesses have developed proprietary information that provides a competitive advantage because it is not known to others. As the United States continues its shift to a knowledge- and service-based economy, the strength and competitiveness of domestic firms increasingly depends upon their know-how and intangible assets. Trade secrets are the form of intellectual property that protects this sort of confidential information.
Trade secret law protects secret, valuable business information from misappropriation by others. Subject matter ranging from marketing data to manufacturing know-how may be protected under the trade secret laws. Trade secret status is not limited to a fixed number of years, but endures so long as the information is valuable and maintained as a secret. A trade secret is misappropriated when it has been obtained through the abuse of a confidential relationship or improper means of acquisition.
A number of competing innovation policy concerns help shape the particular doctrines that comprise trade secret law. The availability of legal protection for trade secrets potentially promotes innovation, encourages firms to invest in employee development, and confirms standards of commercial ethics and morality. On the other hand, trade secret protection involves the suppression of information, which may hinder competition and the proper functioning of the marketplace. An overly robust trade secret law also could restrain employee mobility and promote investment in costly, but socially inefficient security measures.
Trade secrets are primarily a matter of state law. In 1996, Congress enacted the Economic Espionage Act (EEA), a statute that criminalizes both "economic espionage" and the "theft of trade secrets." The EEA provides for substantial fines and imprisonment penalties, as well as criminal forfeiture of property and court orders preserving the confidentiality of trade secrets. Some commentators believe that few prosecutions have occurred under the EEA since its enactment and have deemed the legislation ineffective.
Patents and trade secrets provide different intellectual property options for many new inventions. Inventors typically must choose (1) to maintain an invention as a trade secret, (2) to obtain a patent on the invention, or (3) to allow the invention to enter the public domain. As a result, federal legislation or other developments that are perceived to alter the effectiveness of the patent system may make the trade secret more or less attractive to industry.
As of the date of publication of this report, two bills have been introduced in the 113th Congress that focus upon trade secrets. H.R. 2466, the Private Right of Action Against Theft of Trade Secrets Act of 2013, would introduce a private cause of action within the EEA. S. 1770, the Future of American Innovation and Research Act of 2013, would establish a private cause of action against a person who misappropriates a trade secret while located outside the United States, provided that the misappropriation causes or is reasonably anticipated to cause an injury within the United States or to a U.S. person. As of the date of publication of this report, neither bill had been enacted.
