In Silicon Valley, the land of highly mobile (and sometimes less than loyal) professionals, concerns run high about ex-employees taking company trade secrets to rival firms. It’s part of a growing national trend, according to new data by legal analytics firm Lex Machina (part of LexisNexis). And it extends well beyond the high-tech sector: One of the seminal cases in recent years was over a recipe for jam.
Trade secret theft has gotten a lot of attention lately. In February, Uber paid about $245 million in company equity to settle allegations that it stole trade secrets for autonomous car sensors from Waymo, a sibling company to Google. But concerns go back further. Two years ago, President Obama signed the Republican-sponsored Defend Trade Secrets Act of 2016, the first federal law allowing companies to bring trade secret lawsuits.
Cases take off
Previously, trade secret cases were covered only under state laws, although if a suit involved parties in two states, a federal court would try the case. With passage of the Defend Trade Secrets Act, the number of federal-court cases spiked, from 860 filed in 2016 to 1,132 in 2017.
With no tagging for trade secret law cases in the federal government’s database, called PACER, Lex Machina used its natural language processing tech to scan federal-court cases, identifying over 9,600 entered in PACER since it went online on January 1, 2009. (Cases filed before that date, but still open, were included. Neither PACER nor Lex Machina track cases tried in state courts.) Of them, 1,132 were filed under the new federal law. The first verdict under the law, in February 2017, awarded Dalmatia Import Group $2.5 million in damages for theft of its fig jam recipe.
Data also shows that trade secrets cases extend well beyond Silicon Valley. “I don’t see a ton of tech companies in here. I would have guessed there’d be more,” says Owen Byrd, Lex Machina’s general counsel and chief evangelist.
For instance, Total Quality Logistics, a shipping logistics firm based out of Cincinnati, has sued 15 times and been sued once. The busiest company has been Allstate Insurance, as a plaintiff in 43 cases and a defendant in two. “Among plaintiffs with open cases, there are a noticeable number of insurance companies,” says Byrd. However, they might be bringing lawsuits on behalf of clients, he notes. In July, Lex Machina plans to publish a deeper dive and analysis of trade secret cases and parties, he says.
Among big tech companies with trade secret cases in federal court:
