Killing the Golden Goose

Abstract

Hackers all over the world exploit our reliance on computer systems to take American trade secrets. The response will likely be a dramatic strengthening of trade secret law. Congress has already passed statutes strengthening trade secret law, and more bills are pending. The alarmist rhetoric on cyber-risks to trade secrets, however, ignores the most dangerous risk. By over-reacting to the threat of cyber-misappropriation, we may suppress the innovation and competition that produce our trade secrets in the first place. This paper uses an array of studies on cyber-risks and trade secret litigation to show that bolstering trade secret rights will have little effect on cyber-misappropriation. The evidence indicates that trade secret holders cannot and will not pursue cyber-misappropriators in court for technological and business reasons, not for legal reasons. Worse, strengthening trade secret law will cause significant collateral damage. Trade secret holders will use stronger trade secret rights in other types of misappropriation cases to impede follow-on innovation, restrict worker mobility, dampen competition, and hamper public access to useful information. In short, the costs outweigh the benefits of bolstering trade secret law to combat cyber-misappropriation of trade secrets.