THE ROLE OF "COMMERCIAL MORALITY" IN TRADE SECRET DOCTRINE.

• Author: Oswald, Lynda J.

INTRODUCTION 126 I. CLOAKS AND DAGGERS: E.I. DUPONT DENEMOURS & CO. V. CHRISTOPHER 130 II. HISTORICAL UNDERPINNINGS OF "COMMERCIAL MORALITY" IN BUSINESS LAW DOCTRINE 132 A. Emergence of Commercial Morality Norms in the Mid-Nineteenth Century 133 B. The Debut of "Commercial Morality" in U.S. Caselaw 137 III. EMERGENCE AND EVOLUTION OF "COMMERCIAL. MORALITY" IN U.S. TRADE SECRET LAW 139 A. 1939-1970: The Emergence of "Commercial Morality" in Trade Secret Law 142 B. 1971-1979: From Christopher to the Restatement (Second) of Torts 152 C. 1980-1994: From the Restatement (Second) of Torts to the Introduction of the Restatement (Third) of Unfair Competition 157 D. 1995-2020: The Restatement (Third) of Unfair Competition to the Present 159 IV. THE MODERN ROLE OF COMMERCIAL MORALITY IN TRADE SECRET DOCTRINE 164 CONCLUSION 170 INTRODUCTION

Milestone anniversaries often trigger reflection and analysis. The fiftieth anniversary of E.I. duPont deNemours & Co. v. Christopher (1) provides just such a prompt to explore and evaluate the role of "commercial morality" in trade secret misappropriation doctrine. Christopher is the well-known industrial espionage case in which, as the court so colorfully phrased it, "an airplane [was] the cloak and a camera the dagger." (2) In addressing the legality of flying an airplane over a partially constructed manufacturing facility to take photos of the briefly-but-inevitably exposed trade secrets contained therein, the U.S. Court of Appeals for the Fifth Circuit sought to draw a firm line in the soft sand of trade secret doctrine by declaring such actions illegitimate. It grounded its decision in the ill-defined constraints of "commercial morality," asserting: "Our tolerance of the espionage game must cease when the protections required to prevent another's spying cost so much that the spirit of inventiveness is dampened." (3)

Christopher is routinely featured in textbooks, (4) scholarly commentary, (5) and treatises, (6) and generations of law and business students have debated the outer boundaries of commercial misbehavior and trade secret misappropriation using the intriguing facts and compelling language of this surprisingly short opinion. Modern technological developments allow for interesting hypothetical twists, e.g., how might the use of unmanned drones or satellite images from Google Earth change the outcome?

But what makes Christopher the landmark case that commentators suggest? Despite being half a century old, Christopher has been cited in a mere sixty published court opinions. (7) The bulk of these opinions address acquisition of trade secrets through "improper means"; (8) indeed, Christopher is the quintessential example of wrongful acquisition of trade secrets. (9) In stark contrast to this relative paucity of judicial attention, Christopher has been cited over 250 times by law review commentators (and over 350 times in all by secondary sources), (10) and appears as a prominent example of trade secret misappropriation through "improper means" of access in the Restatement (Second) of Torts and the Restatement (Third) of Unfair Competition." The significance of the case to scholarly analysis and understanding of trade secret doctrine is revealed by the superlative terms commentators use to describe it: "famous," (1)- "[c]lassic," (13) "well-known," (14) "notable," (15) "celebrated," (16) "leading," (17) and "canonical." (18)

The Christopher court also based its holding in part upon the amorphous concept of "commercial morality." This aspect of Christopher has received decidedly less attention than its discussion of "improper means" of trade secret misappropriation: its invocation of commercial morality has been cited a mere thirteen times in court opinions. (19) Yet, the term "commercial morality" had a long history in commentary and in general business law cases prior to Christopher, including appearing in twenty-one trade secret cases in the seventeen years preceding Christopher. (20) Indeed, commercial morality has played a significant, albeit shifting, role in trade secret doctrine over the past seven decades and has become an important part of the contemporary trade secret doctrine lexicon, yet courts and commentators have not explored the meaning of this term. This study fills a gap in the literature by examining the origins of the commercial morality doctrine and its proper application in modern trade secret doctrine.

Part 1 provides a refresher on the provocative facts of Christopher and the short but powerful opinion of the Fifth Circuit. Although we tend to perceive commercial morality notions as being closely linked to Christopher in modern trade secret analysis, the concept has a long history in English and American legal thought. Part II analyzes the origins and historical development of the commercial morality standard in business law. While commercial morality concerns can be traced to medieval England, commentators seized upon the concept during the nineteenth century, galvanized by the financial and commercial misdeeds flowing from the swelling business activity of the Industrial Revolution in both Britain and the United States. The term appeared for the first time in U.S. caselaw in 1852 in a non-trade-secret case and was followed by the use of the term in many other business law settings over the next eight decades.

As Part III demonstrates, trade secret protection grew in importance at the turn of the twentieth century, propelled by the twin engines of growth in economic activity that outpaced regulation and growth in inventive activity that exceeded patent law's ability to adequately protect. Commercial morality first emerged in trade secret doctrine as a result of this increased activity. The development of commercial morality doctrine in trade secret law breaks down into four timespans: (1) from the emergence of the term in the trade secret setting in 1939 in the Restatement of Torts to the decision in Christopher (1938-1970); (2) from Christopher to the Restatement (Second) of Torts (1970-1979); (3) from the Restatement (Second) of Torts to the Restatement (Third) of Unfair Competition (1980-1994); and (4) from the Restatement (Third) of Unfair Competition to the present. Part III traces the evolution of the commercial morality doctrine in trade secret law over time, including the shift from its initial use as a way to justify nascent trade secret law to structuring injunctive relief for misappropriation today.

Part IV considers the implications of commercial morality doctrine in trade secret cases. Courts invoke commercial morality when adjudicating misappropriation claims, but they do not define the meaning of the term or provide reasoned analysis of its application. Nonetheless, commercial morality is an important concept in trade secret misappropriation doctrine because it provides a means by which courts can shift the focus from the nature of the alleged trade secret to the nature of the behavior of the defendant. (21) Moreover, commercial morality operates in practice as a shorthand mechanism allowing courts to exercise fairness between the parties. In that sense, the term furthers very salient societal and legal objectives--ensuring that unethical business behavior is constrained and commercial standards maintained--despite doing so in an ill-defined and seemingly ad hoc manner.

1. CLOAKS AND DAGGERS: E.I. DUPONT DENEMOURS & Co. v. CHRISTOPHER

   E.I. duPont deNemours & Co. v. Christopher (22) is the quintessential example of misappropriation of a trade secret through industrial espionage. An "unknown third party" hired Rolfe and Gary Christopher to fly over a DuPont chemical plant under construction in Beaumont, Texas, to take aerial photographs. (23) The Christophers refused to reveal their client's name, and so DuPont sued them for trade secret misappropriation, claiming they had photographed a highly confidential and valuable unpatented process for producing methanol. (24)

   The case came before the Fifth Circuit on diversity jurisdiction, (25) where the court had to apply Texas law in a case of first impression. (26) The Christophers maintained that their actions were lawful as they had "conducted all of their activities in public airspace, violated no government aviation standard, did not breach any confidential relation, and did not engage in any fraudulent or illegal conduct." (27) In the absence of illegal conduct or a contractual breach, they contended, there could be no misappropriation of a trade-secret. (28)

   The Fifth Circuit disagreed. While previous trade secrets had indeed contained at least one of these elements of wrongful behavior, the court did not believe that Texas law would limit trade secret misappropriation solely to these instances. Rather, the Fifth Circuit noted, the Texas courts had adopted section 757 of the Restatement of Torts, which prohibited acquisition of a trade secret by "improper means," (29) defined, "[i]n general," as "means which fall below the generally accepted standards of commercial morality and reasonable conduct." (30)

   This broader ban, the court found, constrained the defendants' behavior while providing an additional layer of protection to trade secrets' owners. A trade secret owner might be required to build "ordinary fences and roofs" to shield its secrets from prying eyes, the Christopher court opined, but it need not "guard against the unanticipated, the undetectable, or the unpreventable methods of espionage now available." (31) Here, DuPont had taken "reasonable" steps to conceal its secret (32) and the Christophers' efforts to obtain that secret for a third party through aerial surveillance and photography were manifestly improper within the meaning of section 757, regardless of whether the actions were lawful under federal aviation regulations or not in breach of contract. (33)

   Christopher was a short opinion, but it provided the most complete analysis of "improper means" of...