Injunctive relief in the Internet age: the battle between free speech and trade secrets.

• Author: Johnson, Adam W.

1. INTRODUCTION

   The last century has seen substantial advances in communications, of which the Internet is only the most recent development. Each new medium, as it was introduced, changed the balance of power in the constitutional equation involving the First Amendment. Every advance in mass communication has enhanced the immediate and widespread dissemination of information, often resulting in great potential for immediate and irreparable harm. With the Internet, significant leverage is gained by the gadfly, who has no editor looking over his shoulder and no professional ethics to constrain him. Technology blurs the traditional identities of David and Goliath. Notwithstanding such technological changes, however, the Courts have steadfastly held that the First Amendment does not permit the prior restraint of speech by way of injunction, even in circumstances where the disclosure threatens vital economic interests. (1) The information revolution has led to technological innovations in the movement, storage, and dissemination of information. The Internet, which is defined as "the vast international network of computers ... that connects individuals from many nations ... enabl[ing] them to share an incredible array of information and ideas quickly and relatively inexpensively," represents the foremost product of this revolution. (2) The new communication capabilities created by the Internet allow a person, with good or bad intent, to distribute information to millions of people via a Web site. (3) This ability raises serious implications when trade secret information is posted on the Internet. Once a trade secret becomes publicly available, it loses its legal secrecy, and it can no longer receive special legal protection. (4) Additionally, competitors and everyone else on the Internet can gain access to the information. For those who rely on trade secret protection to guard their inventions, this dilemma presents a growing concern.

   Imagine yourself as the CEO or the general counsel of a large company, XYZ, which produces two million widgets annually. To be successful, XYZ must invest a significant amount of company resources in research and development. These funds support engineering and product development to ensure that XYZ will remain ahead of its competitors in developing new products, materials, and processes. Although some of these products have patents, in most cases, XYZ depends on trade secret law to protect its investments, primarily because the trade secret approach requires no application, begins immediately, and encompasses a wide variety of uses. (5) To ensure the guarantee of trade secret protection, XYZ implements many security measures and relies on employee confidentiality agreements.

   Each of XYZ's thousands of employees has taken an oath of loyalty and signed a confidentiality agreement. Most employees see themselves as part of a team, but predictably, a few employees become disgruntled or stray at the promise of easy money. Imagine that an angry employee, to retaliate against XYZ or to make some easy money, begins stealing confidential documents. In doing so, this employee pilfers plans that detail the design and production processes of XYZ's most profitable widgets. In an instant, that employee can bring the company to its knees by selling this information to XYZ's competitors, by posting this information on the Internet, or--even worse--by giving the documents to a third party to post on the Internet. As CEO or general counsel, what can you do to protect XYZ?

   In the first and second scenarios, in which a competitor pays an employee for the information or the employee has posted the information on the Internet, XYZ has legal recourse. (6) Under trade secret law, XYZ can sue the appropriator for civil damages. (7) In addition, the infringer may also receive criminal sanctions under the Economic Espionage Act. (8) Under both of these theories, XYZ would be entitled to monetary compensation for damages resulting from the lOSS. (9) In the second scenario, where the employee has posted the information on an Internet site, the company would probably be able to get an injunction against the employee's site, and could sue the employee for damages based on the employee's violation of the confidential relationship. (10) This dual strategy allows the company both to stop the dissemination, possibly preserving the trade secret, and also to recover some measure of the losses suffered.

   The third scenario, in which an employee provides trade secret information to a third party who then posts it on the Internet, presents a problem for XYZ. Under current laws, XYZ will not be able to get an injunction against the site, unless there was improper conduct on the part of a third party (such as bribery). Where improper conduct is not evident, courts will not restrain speech via injunction, and XYZ lacks any remedy at law (11) due to the interplay between trade secret and free speech protection. (12) Except for a few narrow circumstances, the First Amendment protects speech from prior restraint. (13) The United States Supreme Court has labeled a prior restraint a "special vice," because prior restraints suppress speech before there is "an adequate determination that it is unprotected by the First Amendment." (14) The situation mentioned above--a third party posting trade secret information on the Internet--might not fall within one of the excepted categories. (15) Additionally, such posting cannot be enjoined based on a duty of confidentiality, because the third party has no relationship with XYZ, and thus, no duty to keep the information secret. (16) Trade secret holders have tried to seek temporary restraining orders or preliminary injunctions to prevent actions by third parties, often basing their claims on the confidentiality agreements with the employees who gave out the information. (17) The courts involved in these cases, however, have shown reluctance to restrain third parties' speech. (18) The company can try to challenge this in court, but by the time the case gets to trial, any remaining modicum of "trade secrecy" will be long gone, along with the company's trade secret protection. (19)

   After the trade secret has been lost, XYZ can sue for damages; in many instances, however, this remedy does not offer adequate protection. (20) This remedy is often unavailable, because courts generally require the breach of a fiduciary relationship, a contractual duty between the parties, or industrial espionage in order to support an award of damages, none of which exist in this scenario. (21) Additionally, when courts award damages, the amount granted often falls short of covering the losses. (22) Thus, the company loses its trade secret because of dissemination on the Internet, and it still has no satisfactory remedy at law. This example illustrates the problem--a gap in trade secret protection--resulting from the clash between free speech and trade secret law in the Internet age.

   This Note will illustrate the void in trade secret protection arising from the conflicting goals of trade secret law and the First Amendment. This void has allowed third parties to post trade secret information, often procured through inappropriate means or in violation of an employee's duty to maintain secrecy. (23) Part II of the Note sets out the basic frameworks of trade secret and First Amendment law as they apply in these circumstances. Part III examines both sides of this conflict, including the means of resolution used in cases like Ford Motor Co. v. Lane. (24) Part IV explains why injunctive relief should be permitted in trade secret cases when a third party has obtained information from an employee, in violation of a duty of confidentiality. This Note concludes that, because of the gap that has emerged in trade secret protection, stemming from developments in communication technology, courts should begin to allow trade secret owners injunctive relief. This relief will mitigate damages when third parties have, through inappropriate means or an employee's wrongful disclosures, obtained confidential trade secret information.

2. THE BACKGROUND OF THE CONFLICT BETWEEN TRADE SECRET LAW AND THE FREEDOM OF SPEECH

   A basic understanding of trade secret and free speech laws provides a useful, if not necessary, context for a discussion of the necessity of injunctive relief in the case of third-party posting of trade secret information on the Internet. (25) These two areas of law conflict at the most basic level as to whether enforced silence benefits or impairs society. (26)

   1. Trade Secret Law

      Intellectual property law rests on the premise that an innovator will not spend labor, time, or money to create new things if the law does not assure the profits of her invention. (27) As such, the area of intellectual property has evolved as a legal safeguard for individuals who invest in research and innovation. These laws have helped to propel technological progress in the United States and the rest of the world. (28) While several different types of intellectual property protections exist at law, businesses turn increasingly to trade secret law to protect their intellectual property interests. (29)

      Trade secret protection has acquired popularity because it is simple and effective, and it offers sweeping protection. (30) By utilizing trade secret protection, a company can avoid many of the administrative hassles associated with other forms of intellectual property protection, such as having to apply to a government agency like the U.S. Patent and Trademark Office for approval. (31) By avoiding the application/approval process, a company saves itself administrative and legal costs as well as delays. (32) The only cost associated with trade secret protection is that of the security measures necessary to maintain secrecy. (33) In addition, the company can benefit from immediate, sweeping, and expansive protection, as trade secret...