Trade Secrecy Injunctions, Disclosure Risks, and eBay's Influence

• Date: 01 December 2019
• Author: Deepa Varadarajan
• Published date: 01 December 2019
• DOI: http://doi.org/10.1111/ablj.12153

American Business Law Journal

Volume 56, Issue 4, 879–925, Winter 2019

Trade Secrecy Injunctions,

Disclosure Risks, and eBay’s

Influence

Deepa Varadarajan*

Historically, intellectual property (IP) owners could rely on injunctive remedies to

prevent continued infringement. The Supreme Court’s eBay v. MercExchange

decision changed this, however. After eBay, patent courts no longer apply pre-

sumptions that push the deliberative scales in favor of injunctions (or “property

rule” protection). Instead, patent injunctions require a careful four-factor analy-

sis, where plaintiffs must demonstrate irreparable injury (i.e., that money damages

cannot compensate). Without question, eBay has made it harder for patent plain-

tiffs to secure injunctions, and has led many district courts to consider innovation

policy concerns (e.g., the strategic behavior of patent “troll” plaintiffs) in the

injunction calculus. By and large, courts’ more deliberative approach to patent

injunctions post-eBay has been viewed as beneficial for the patent system.

Over the past decade, eBay’s influence has migrated to other areas of IP. This

article offers the first account of eBay’s impact on federal trade secrecy injunc-

tions. Important differences between trade secret law and other areas of IP—for

example, the hard-to-quantify risk that disclosure poses to trade secret owners—has

lessened eBay’s influence on trade secrecy injunctions. This article argues that dis-

closure risks justify a bifurcated approach to trade secrecy injunctions. That is, in

cases involving the dissemination of trade secrets, courts should presume irrepara-

ble injury in the injunction calculus. However, in cases involving the

unauthorized use of a trade secret—that is, where a defendant builds upon a

*Assistant Professor of Legal Studies, Department of Risk Management and Insurance,

J. Mack Robinson College of Business, Georgia State University; Secondary Appointment,

Georgia State University College of Law. For helpful comments and conversations, I thank

Jonas Anderson, John Golden, Charles Tait Graves, Saurabh Vishnubhakat, as well as par-

ticipants at the 2019 Works in Progress Intellectual Property Colloquium and the 2018

Southeastern Academy of Legal Studies in Business Conference. I would also like to thank

Brooke Wilner for excellent research assistance. All errors are my own.

©2019 The Author

American Business Law Journal ©2019 Academy of Legal Studies in Business

879

plaintiff’s trade secret but does not disseminate it—courts should not presume

irreparable harm and, instead, should apply the eBay framework. As part of this

assessment, courts should consider policy concerns related to cumulative innova-

tion and employee mobility.

INTRODUCTION

The Supreme Court’s eBay, Inc. v. MercExchange, L.L.C. decision dramati-

cally altered the world of patent remedies.

1

Before eBay, a successful pat-

ent plaintiff could count on obtaining injunctive relief, more or less as a

matter of course.

2

In eBay, the Court rejected this “general rule” favoring

patent injunctions—or, for that matter, any “categorical” rule for injunc-

tions.

3

Instead, federal courts must apply a “well-established” four-factor

test to each case, consistent with “traditional principles of equity.”

4

Because a movant “must demonstrate” each of the four factors,

5

eBay has

“jettisoned the presumption of irreparable harm” for successful plaintiffs

in patent cases.

6

In a nutshell, eBay has made it harder for patent plaintiffs to demon-

strate the need for injunctive relief.

7

Moreover, Justice Kennedy’s

1

547 U.S. 388 (2006).

2

Id. at 393–94.

3

Id. at 393.

4

Following eBay, plaintiffs seeking injunctive relief “must demonstrate” that (1) they suf-

fered an irreparable injury; (2) legal remedies, like money damages, inadequately compen-

sate for that injury; (3) the balance of hardships weighs in their favor; and (4) an injunction

will not disserve the public interest. Id. at 391. Whether this test was, indeed, “well

established” in federal courts before the Supreme Court’s eBay decision has been disputed.

See Mark P. Gergen et al., The Supreme Court’s Accidental Revolution? The Test for Permanent

Injunctions, 112 COLUM.L.REV. 203, 207 (2012) (arguing that “the Supreme Court’s four-

factor test differs from traditional equitable practice in … significant ways”).

5

eBay, 547 U.S. at 388, 391, 394.

6

Robert Bosch LLC v. Pylon Mfg. Corp., 659 F.3d 1142, 1149 (Fed. Cir. 2011) (“We take

this opportunity to … confirm that eBay jettisoned the presumption of irreparable harm as

it applies to determining the appropriateness of injunctive relief.”).

7

See infra Part IB.

880 Vol. 56 / American Business Law Journal

influential eBay concurrence has persuaded courts to consider innovation

concerns when evaluating patent injunction requests—for example, the

dangers of “vague” patent boundaries and the strategic behavior of non-

practicing patent “trolls.”

8

In this way, eBay shines a spotlight on the rem-

edies determination as an important site for patent policy. Like other

aspects of patent law, the injunction decision can advance the overarch-

ing goals of the patent system—helping to balance owners’ interests

against those of follow-on inventors and the broader public.

9

By and

large, commentators have celebrated courts’ more deliberative approach

to patent injunctions post-eBay.

10

Over the past decade, a number of federal courts have applied eBay’s

lessons to other areas of intellectual property (IP), including copyright

injunctions and, more recently, trademark injunctions.

11

Some commen-

tators have been more critical of eBay’s injunction-restricting influence in

these nonpatent contexts.

12

Yet unexamined, in this burgeoning schol-

arly literature assessing eBay’s impact on IP injunctions, are trade secret

injunctions.

In this article, I consider whether and how federal courts have

applied eBay’s lessons in the trade secret context. As was historically

true of patent, copyright, and trademark cases, if a plaintiff proved

trade secret misappropriation, then her quest for injunctive relief was

fairly easy. A successful plaintiff typically did not have to show irrepara-

ble harm. Instead, many courts presumed it from a defendant’s acts of

8

eBay, 547 U.S. at 396 (Kennedy, J., concurring). See infra text accompanying notes 59–66.

9

See Maureen A. O’Rourke, Toward a Doctrine of Fair Use in Patent Law, 100 COLUM.L.REV.

1177, 1180 (2000) (“Virtually since their inception, both the copyright and patent laws have

grappled with the question of how to safeguard the incentive inherent in the grant of exclu-

sive rights while at the same time allowing second-comers to build on prior works.”).

10

See, e.g.,DAN L. BURK &MARK A. LEMLEY,THE PATENT CRISIS AND HOW THE COURTS CAN

SOLVE IT138–39 (2009) (complimenting eBay as an industry-specific policy lever); Stewart

E. Sterk, Property Rules, Liability Rules, and Uncertainty About Property Rights, 106 MICH.

L. REV. 1285, 1333 (2008) (applauding eBay’s influence on patent injunction decisions). But

see Richard A. Epstein, The Disintegration of Intellectual Property? A Classical Liberal Response to

a Premature Obituary,62S

TAN.L.REV. 455, 494 (2010) (“Nothing in the traditional principles

of equity requires that radical revision of the right to exclude that eBay seems to invite.”).

11

See infra Part IC.

12

See, e.g., Mark A. Lemley, Did eBay Irreparably Injure Trademark Law?,92NOTRE DAME

L. REV. 1795 (2017).

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