Microsoft promotes the value of trade secrets as senate committee discusses new bill
Wed 2 Dec 2015
A spokesman for the Microsoft On The Issues website has expressed the company’s support for new legislation that would reform the legal framework for companies wishing to protect their trade secrets in a cloud-centric world where such information is frequently forced to reside on networks.
In the post Microsoft’s Assistant General Counsel of IP Policy & Strategy Jule Sigall rallies behind business and academic concerns supporting the proposed Defend Trade Secrets Act 2015 (DTSA), which goes before the United States Senate Judiciary Committee today.
Sigall, who is also Associate General Counsel for Copyright in Microsoft’s Legal & Corporate Affairs department, makes an ardent case for reform of the current legislation, as furnished by the Uniform Trade Secrets Act (UTSA). UTSA’s provisions are argued to be fractured, and rendered ineffective both by the inability of plaintiffs to pursue suits in federal courts (despite trade secret infractions being Federal by nature), and by the fact that not all states have adopted or instituted all the measures provided by the legislation. Additionally the limited provision for redress in international cases of trade secret theft are to be addressed.
Sigall presents the case of Microsoft’s Cortana AI as an example of why new legislation is necessary:
‘[Behind] Cortana sits a vast amount of technology developed or enhanced in-house by Microsoft – voice recognition; language translation; reactive and predictive algorithms that can synthesize context, location and data, and interface with the vast resources of the Bing search engine index; and a complex array of cloud servers to crunch and serve data in real time. This technology represents tens of thousands of hours of research, trial and error, and continued improvement as Cortana is adapted for new devices and new scenarios’
Sigall argues that better protection procedures for trade secrets, the only form of IP which currently lacks comprehensive cover in law, is essential for start-ups whose ideas, business plans and even customer lists may constitute the only marketable value of a company that is just in the stage of consolidating.
‘A trade secret is unique among forms of intellectual property in how it is legally protected. While it is a federal crime to steal a trade secret, a business that has its trade secrets stolen must rely on state law to pursue a civil remedy. Owners of copyrights, patents, and trademarks can go to federal court to protect their property and seek damages when their property has been infringed, but trade secret owners do not have access to such a federal remedy.’
According to Sigall the state-by-state system currently in place was ‘simply not built with the digital world in mind’, and calls for ‘A uniform, national standard for protection’ which does not stop at state lines or even national borders.
Microsoft had a hard time adjusting to the open source revolution, particularly in regard to the PC/Mac Office product which at one time represented the most successful and ubiquitous software in the world, and the many legal and semantic wrangles over the closed-source nature of Office formats such as Word led ultimately to a hybridised open source .docx format which is still argued to not be the OpenXML that was promised.
Defend Trade Secrets Act 2015 contains [PDF] significant material from its doomed predecessor of 12 months ago, and one of its boldest initiatives is the extension of ex parte seizures, instituted in UTSA in a more limited form (particularly in the 1985 amendment to the Uniform Law Commission’s 1979 initial legislation). An ex parte seizure provides a kind of restraining order or injunction on disputed information, or even the dissemination of knowledge about whether the information is disputed, and places it under federal protection on the plaintiff’s behalf.
In practical terms this seems likely to extend the circumstances under which information about leaks, hacks or thefts of information can be made the subject of gag orders for legal reasons, since it brings trade secrets into the same legal framework as other forms of intellectual property which enjoy more comprehensive coverage and recourse in law. The bill would also extend the purview of the 1996 Economic Espionage Act to take in a more rigorously conceived concept of ‘trade secrets’.
Controversial east-west hacking scandals of the last 15 months are a significant motivator in the DTSA initiative, both last year’s failed proposal and this year’s revision. However the cases in defence of the bill go back further, including the 2010 incident where a Ford project manager copied 4,000 critical company documents and consigned them to one of the motor manufacturer’s Chinese competitors. Another example in this line is the conviction this year of former DuPont employee Edward Schulz for conspiring with a South Korean company to misappropriate DuPont trade secrets estimated at a value of $50-100 million.
But the 2015 revision’s best chance of an improved performance second time round is the political and business furore that emerged after Chinese businesses benefitted from what was alleged to be a Chinese state attack where company secrets from the likes of Westinghouse and US Steel ended up in the hands of several companies in China. The prevailing political and business belief is that China is sponsoring cyber-espionage and economic aggression via the exfiltration of U.S. trade secrets.
Even with the issues clear, the risk of disproportionate or over-reaching response in the event of the new bill passing successfully through congress in 2016 (it is unlikely to pass this year) is clear enough that the lack of network discussion about it is quite surprising. Essentially DTSA represents the same kind of proposed ‘judicial fast track’ – though in favour of corporations instead of governments – that has outraged so many commenters in the wake of the November 13th Paris attacks.
Silence in court
Amongst its more quotidian clauses, the Defend Trade Secrets Act 2015 effectively offers corporate plaintiffs increased opportunity to federalise disputed private material in cases involving trade secrets, with all the penalties for infraction associated with that change of status – and far greater scope for sub judice orders likely to contain and conceal future breaches of information.
The bill has its opponents. In July of this year two law professors, Sharon Sandeen and David Levine, wrote a letter to Congress detailing the disparities between the 2014 and 2015 versions of the bill, and outlining an array of arguments against it.
Eric Goldman of the Santa Clara University School of Law has just published a paper outlining the risks of extending ex parte seizures in the manner that DTSA 2015 proposes. Goldman writes that ‘the Seizure Provision does not solve many, if any, problems. In light of the remedies already available to trade secret owners in ex parte temporary restraining orders (TROs), the Seizure Provision purports to apply to only a narrow set of additional circumstances. In exchange for that modest benefit, the Seizure Provision creates the risk of anti-competitive seizures and seizures that cause substantial collateral damage to innocent third parties. To discourage such abuses, the Act imposes procedural safeguards and creates a cause of action for wrongful seizures. Unfortunately, those safeguards are miscalibrated to achieve the desired protections against abusive seizures.’