Rethinking "reasonableness": Implementation of a National Board to Clarify the Trade Secret Standard Now That the Work-from-home Culture Has Changed the Rules

• Publication year: 2023

Rethinking "Reasonableness": Implementation of a National Board to Clarify the Trade Secret Standard now that the Work-From-Home Culture has Changed the Rules

Hannah E. Brown
hannahebrown90@gmail.com

Rethinking "Reasonableness": Implementation of a National Board to Clarify the Trade Secret Standard now that the Work-From-Home Culture has Changed the Rules

Cover Page Footnote
Senior Associate, Gordon Rees Scully Mansukhani; I thank Trevor Goehring and Dennis Brown for their helpful input and suggestions on earlier drafts.

[Page 268]

RETHINKING "REASONABLENESS": IMPLEMENTATION OF A NATIONAL BOARD TO CLARIFY THE TRADE SECRET STANDARD NOW THAT THE WORK-FROM-HOME CULTURE HAS CHANGED THE RULES

Hannah E. Brown^*

[Page 269]

Table of Contents

I. Introduction...............................................................................................271

II. Background on Trade Secrets and "Reasonable" Measures to Protect Them............................................................................................273

A. What Is A Trade Secret?..............................................................273

B. Protecting Trade Secrets..........................................................276

C. What Are "Reasonable Measures"?...................................279

1. Physical Marking of the Documents..........................................280
2. Employee Access to Trade Secrets.............................................281
3. Sharing Trade Secrets With Non-Employees...........................283
4. Secure Storage of the Information.............................................285
5. Employee Access to Information Following Termination.....285
6. Summary of Main Factors............................................................ 286

III. The Digital and Work-From-Home Revolution..........................287

A. Increase in Remote Work...........................................................287

B. Increase in Amount and Value of Intangible Property 289

IV. The Issue: Companies and Courts Are Not Adapting To the Changes.......................................................................................................289

A. Seemingly "Reasonable Measures" Not Analyzed by Courts..................................................................................................290

1. Employee Training........................................................................290
2. Increased Cybersecurity ................................................................ 291
3. Ensuring a Secure and Private Workspace................................292

B. Companies Fail to Adapt.............................................................294

V. Recommendation : A National Trade Secret Registrar Identifying Reasonable Efforts.....................................................296

A. A National Registrar and its Criteria.................................298

B. Caveats to this Proposal............................................................300

C. Possible Critiques of this Proposal.......................................301

D. Benefits of this Proposal...........................................................302

Page 270

VI. Conclusion....................................................................................................304

[Page 271]

I. Introduction

For many of us, it was a memorable week in 2020: one day, we were working in an office with dual computer monitors and an ergonomic chair; the next day, our office had closed, and we were working from our kitchen table on an outdated laptop with our noisy partner working at the same table and our kids attending school remotely in the next room.¹

The COVID-19 pandemic affected everyone differently, but for many of us, it changed how we worked.² Many people were furloughed or lost their jobs due to business shutdowns, and others were forced to change their work situation completely. As of April 2020 — peak pandemic — sixty-two percent of employed Americans worked at home, compared to about twenty-five percent who did so before the pandemic.³ For those whose jobs remained the same during the pandemic but who were no longer allowed in the office, they were forced to adapt. some may have been forced to take client calls from a shared workspace or log into the office system using a computer shared by the household.

More employees working from home necessarily means more computers and systems accessing company data, more remote transmissions of information,

[Page 272]

less secure workspaces, and a large increase in video and phone conversations. In 2019, Zoom had an average of 10 million daily meeting participants, but by 2020, it had 350 million; "to Zoom" had become a verb.⁴ An issue that may not have immediately occurred to employers was: "now that almost all my employees are discussing company business from remote locations and sharing confidential documents via email . . . how secure are they being and how safe is our proprietary information?"

Specifically, many companies have trade secrets, a type of intellectual property that is valuable because it is not generally known.⁵ Under the federal Defend Trade Secrets Act ("DTSA"), almost any type of information can qualify as a trade secret but only if "the owner thereof has taken reasonable measures to keep such information secret[.]"⁶ This requirement — using the law's most vague unit of measurement⁷ — is not defined in the statute, and Congress has not provided guidance on how to interpret this term. What is "reasonable" varies and may differ based on the court, the company size, and the particular facts of each situation.⁸ There is abundant pre-pandemic case law addressing the issue with courts around the country analyzing a variety of different fact patterns.⁹ However, the widespread increase in working from home poses the question: with more employees working from home — maybe on shared computers or in a less secure space accessible to the public or a family member — will the definition of "reasonable measures" change? Should it?

Part II of this Article provides background information on trade secrets and how courts have addressed what constitutes reasonable measures to protect such

[Page 273]

secrets. Part III discusses the recent shift in the American work-life landscape, namely the upsurge in teleworking and other changes in today's digital era. Part IV describes the issue this poses for two reasons: because companies have not adapted their security and technology to keep up with the rise in remote work and protect their proprietary intangible information and because courts have not changed their analysis to require certain seemingly "reasonable" actions. Part V suggests a solution, a national board that sets a standard for companies to follow so that they may engage in sufficiently "reasonable" protection efforts. If followed, the standard provides a presumption of "reasonable measures" under the DTSA.

II. Background on Trade Secrets and "Reasonable" Measures to Protect Them

A. What Is A Trade Secret?

The most common reason courts evaluate trade secrets is under a claim of trade secret misappropriation. Misappropriation was governed only by state law until 2016 when Congress enacted the DTSA, creating a federal private right of action for trade secret misappropriation.¹⁰ Many states have enacted their own trade secret laws, but the DTSA provides a national uniform cause of action for misappropriation.¹¹

Under the DTSA, one form of misappropriation is via "acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means[.]"¹² The term "improper means" includes "theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means[.]"¹³ For a plaintiff to prove misappropriation, it must initially prove there is

[Page 274]

something to misappropriate, i.e., that it has a trade secret to begin with.¹⁴ Establishing and identifying one's trade secrets is the first step in being able to protect them.¹⁵

The DTSA's definition of a trade secret does not specify the format or subject matter of the secret, however, case law shows that trade secrets are most often intangible.¹⁶ The DTSA lists examples of trade secrets as "all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes "¹⁷ Courts have expanded these examples, finding that a trade secret can be, inter alia, marketing plans and analysis;¹⁸ a compilation of customer, operator, and vendor information;¹⁹ customer lists²⁰ (alone or with pricing and sales information),²¹ prototypes,²² software, source code, user manuals,²³ and recipes.²⁴ The most famous trade secrets include the original recipe for Coca-Cola, the ingredients for Kentucky Fried Chicken's original spice recipe, and the Google search algorithm.²⁵

[Page 275]

A trade secret is, of course, "secret," meaning generally it is not publicly available and a third party cannot simply look it up or figure it out. A trade secret also cannot be something that "any user or passer-by sees at a glance[,]" such as an item's appearance or a screen display.²⁶ However, courts are split on whether a trade secret can consist of publicly available information. Some courts say yes.²⁷ In that analysis, even if isolated pieces of the trade secret information can be found publicly, the compiled list or the "minute details" of that information can nevertheless constitute a trade secret.²⁸ other courts disagree, finding that if the list of information is obtainable by compiling public information, the information cannot be a trade secret.²⁹

[Page 276]

In sum, the definition of a trade secret under the DTSA consists of three elements: (1) information, (2) that is valuable because it...