Day 1, Panel 3: Hot Topics in Trade Secrets
December 4, 2025
B-CLE Recording (CLE: $100) | Agenda | Event Resources | Speaker Biographies
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Speakers
Camilla Hrdy, Rutgers Law School
Rajiv Patel, Fenwick
Thomas Sprankling, WilmerHale
Panel Summary
Yar Chaikovsky opened by framing the session as a reflection of the broader shifts in patent law — noting that trade secret has only recently emerged as a topic at the Advanced Patent Law Institute, driven by the post-AIA weakening of patents, the rise of AI, and the passage of the Defend Trade Secrets Act in 2016. Camilla Hrdy provided key statistics: approximately 1,400 federal trade secret cases are filed per year, the plaintiff win rate at trial exceeds 80%, and while the median damages award is under a million dollars, the average exceeds eight million due to some enormous outlier verdicts now rivaling patent cases. Rajiv Patel highlighted one of the most significant AI-specific developments — that unlike patent and copyright, trade secret protection requires no human creator, meaning AI-generated outputs such as new code or datasets can qualify as trade secrets if they meet the economic value and secrecy requirements, though the “readily ascertainable” standard presents a growing challenge as competing AI systems can potentially reverse-engineer what another AI produced. Tom Sprinkling flagged the jurisdictional complexity that distinguishes trade secret from patent litigation — noting the absence of a Federal Circuit equivalent to unify trade secret law, the divergence between state Uniform Trade Secret Act standards and the newer DTSA, and the resulting patchwork of conflicting circuit and state court decisions that makes it nearly impossible to give clients definitive advice on issues ranging from pleading requirements to the meaning of “improper means” in the AI context.
The panel then moved through several critical practical issues including trade secret identification standards, statute of limitations, damages, and extraterritoriality. On pleading, Sprinkling and Hrdy walked through the divergence between California’s “reasonable particularity” pre-discovery identification requirement under the California Uniform Trade Secrets Act and the DTSA’s less defined “sufficient particularity” standard as interpreted by the Ninth Circuit’s recent Quintara decision — which suggests identification can wait until summary judgment under the DTSA, dramatically increasing litigation costs for defendants who must litigate through discovery before the scope of the alleged trade secret is even defined. On damages, Yar Chaikovsky noted that trade secret cases lack the Federal Circuit’s disciplined appellate review of damages that has repeatedly pared back large patent verdicts — meaning unjust enrichment theories, RICO treble damages overlays, and the absence of a clear apportionment requirement can produce enormous and largely unreviewable verdicts. On extraterritoriality, Hrdy explained that the DTSA’s “act in furtherance” hook — established through cases like Hytera and the TikTok settlement — has been interpreted broadly enough to reach foreign defendants whose only US connection is poaching employees from a US company or selling US-market products made with stolen trade secrets, effectively overcoming the presumption against extraterritoriality through the statute’s express language. Rajiv Patel closed with practical transactional advice — urging companies to layer trade secret, patent, and copyright protections on the same IP assets, ensure employment agreements clearly establish company ownership of AI-generated outputs, and address IP indemnification and trade secret risk allocation at the time of contracting with supply chain partners rather than after a dispute arises.
Key Learning Points:
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AI Has Fundamentally Disrupted the Trade Secret Framework — No Human Creator Required, But “Readily Ascertainable” Is Now Contested: Unlike patent and copyright, trade secret protection does not require a human inventor or author, making AI-generated datasets, models, and code potentially protectable — but the growing ability of competing AI systems to reverse-engineer outputs is creating serious uncertainty about whether AI-generated information meets the “not readily ascertainable through proper means” requirement, a question that will depend heavily on jurisdiction, the type of AI used, the specificity of the prompt, and whether access was obtained through a bot or scraping tool that courts may characterize as improper means regardless of public availability (Rajiv Patel; Camilla Hrdy; Tom Sprinkling).
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Trade Secret Pleading Standards Create Asymmetric Litigation Costs That Favor Plaintiffs — Especially Under the DTSA: California’s pre-discovery identification requirement under the CUTA creates a defendant-friendly early disposition mechanism, but the Ninth Circuit’s Quintara decision suggests the DTSA allows identification to be deferred to summary judgment — meaning defendants in DTSA cases must fund potentially millions of dollars in discovery before they know what trade secrets they are even accused of stealing, while plaintiffs face no binding early disclosure obligation, creating a strategic incentive to allege DTSA claims broadly and defer specificity (Tom Sprinkling; Camilla Hrdy; Yar Chaikovsky).
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Trade Secret Damages Are Large, Growing, and Largely Unreviewable — Layered IP Strategy Is Essential: Trade secret damages combining unjust enrichment theories, reasonable royalty analysis, RICO treble damages, and the absence of a clear apportionment requirement can produce multi-billion dollar verdicts without the Federal Circuit oversight that has historically reined in large patent damages — making trade secret cases a growing financial risk for defendants; meanwhile, companies should proactively layer patent, copyright, and trade secret protections on the same assets, ensure employment and supply chain contracts clearly establish IP ownership and indemnification scope, and never include trade secret details in a patent application that will be published (Yar Chaikovsky; Tom Sprinkling; Rajiv Patel).
Program Transcript
Key Terms: Trade Secret Definition, Economic Value Requirement, Secrecy Requirement, Reasonable Measures Requirement, Not Generally Known Standard, Not Readily Ascertainable Standard, Improper Means Standard, Misappropriation, Trade Secret Misappropriation, Independent Development Defense, Reverse Engineering Defense, Trade Secret vs. Patent, Trade Secret Scope, Trade Secret Duration, No Expiration Trade Secret,Defend Trade Secrets Act (DTSA), Federal Trade Secret Law, 18 USC 1836, 18 USC 1837, DTSA 2016, DTSA vs. State Law, DTSA Owner Standard, DTSA Possessor Standard, DTSA Standing, DTSA Extraterritoriality, DTSA Act in Furtherance, DTSA Federal Forum, DTSA vs. UTSA, Federal vs. State Trade Secret, DTSA Supreme Court Gap, Uniform Trade Secret Act (UTSA), California UTSA, State Trade Secret Law, UTSA Possessor Standard, UTSA Complainant Standard, UTSA vs. DTSA, State Law Preemption, Kewanee Oil Case, State Court Divergence, AI-Generated Trade Secret, AI No Human Creator, AI Readily Ascertainable, AI Reverse Engineering, AI Bot Scraping, Proprietary AI System, AI Output Ownership, LLM Trade Secret, AI Model Training Data, AI Code Trade Secret, AI Formula Trade Secret, AI Prompt Engineering, CompuLife Bot Case, AI vs. Human Capability, AI Information Aggregation, Readily Ascertainable Standard, Proper Means Standard, Improper Means Doctrine, Bot Scraping Improper Means, Public Information Trade Secret, CompuLife v. LifeQuote, DuPont v. Christopher, Aerial Surveillance Improper Means, Terms of Service Violation, Hacking AI Models, Human vs. Bot Standard, Kyllo Case Analogy, Reasonable Expectations Standard, Jurisdictional Variation Improper Means, Reasonable Particularity Standard, Sufficient Particularity Standard, California Pre-Discovery Identification, DTSA Identification Timing, Quintara Decision, InteliClear Case, Motion to Dismiss Trade Secret, Summary Judgment Identification, Discovery Before Identification, Fishing Expedition Concern, Trade Secret Scope Definition, Question of Law vs. Fact, Pleading Standard Divergence, Early Case Disposition, Defense Cost Asymmetry, Three-Year Statute of Limitations, Discovery Rule, Reasonable Diligence Standard, Inquiry Notice Standard, Should Have Known Standard, Mere Suspicion Insufficient, Insulet v. Eoflow, Prototype Conference Disclosure, Employee Departure Notice, Good Faith Assumption, Ongoing Misappropriation Rule, Continuing Violation Doctrine, Affirmative Defense Burden, California SOL Standard, DTSA SOL Uncertainty, Owner Standard DTSA, Possessor Standard UTSA, Employment Agreement Ownership, Company IP Ownership, Snyder v. Beam, Stolen Trade Secret Standing, Derived Possession Standing, Independent Development Ownership, Multiple Possessor Rule, AI-Generated Ownership, Assignment Clause, Work for Hire Trade Secret, State Standing Rules, Unjust Enrichment Damages, Reasonable Royalty Trade Secret, Apportionment Trade Secret, No Apportionment Requirement, RICO Treble Damages, Trade Secret RICO Claim, Damages Median Under Million, Damages Average Over Eight Million, Large Trade Secret Verdicts, Federal Circuit Absence Trade Secret, Unreviewable Damages, Damages Awards Rising, Conspiracy Damages, International Damages Calculation, 1400 Federal Cases Per Year, DTSA Case Volume, 80% Trial Win Rate, Pre-Trial Settlement Rate, Early Injunction Resolution, Average Damages Eight Million, Median Damages Under Million, Post-DTSA Case Rise, Trade Secret Litigation Cost, Discovery Cost Million Plus, DTSA Extraterritoriality, Act in Furtherance Standard, US Citizen Requirement, Hytera Case, TikTok Trade Secret Case, iTera Case, Foreign Defendant DTSA, Employee Poaching Extraterritorial, US Market Sales Extraterritorial, Presumption Against Extraterritoriality, Minimum Contacts Analogy, Multi-Billion International Claims, Global Financial Disclosure, Cross-Border Trade Secret, China Trade Secret Cases, Trade Secret Patent Layering, Copyright Trade Secret Layering, IP Portfolio Strategy, GitHub Code Upload Risk, Code Copyright Registration, Partial Code Registration, Patent Application Trade Secret Risk, Published Patent Application Risk, Trade Secret Prosecution Risk, IP Ownership Employment Agreement, Supply Chain IP Allocation, Transactional Trade Secret Strategy, Accelerated Patent Prosecution, Multi-IP Enforcement, Employment Agreement IP Clause, Non-Disclosure Agreement, Trade Secret Assignment, Employee Departure Risk, Client List Trade Secret, Contact List Trade Secret, Talent Movement AI Risk, Silicon Valley Talent Competition, Supply Chain Indemnification, IP Risk Allocation Contract, Employee Download Activity, Suspicious Activity Detection, Pre-Departure Monitoring, CompuLife v. LifeQuote, DuPont v. Christopher, Quintara Decision, InteliClear Case, Insulet v. Eoflow, Snyder v. Beam, Hytera Case, TikTok Trade Secret Settlement, Kewanee Oil Case, Ross v. Thomson Reuters, Oakwood Case
[WAYNE]
So I wanted to welcome everybody back for this session. Uh, I think this is an interesting session in terms of the progression of the Advanced Patent Law Institute.
We go back and look at it over the last 20 years, trade secret has only emerged in the last few years, which I think is a reflection of what’s going on in patent law. So with that our moderator today is, is always intimidating to introduce because like Cher and Madonna in the pat world, he only goes by one name. And you can say this anywhere in the country and everybody knows who you’re talking about.
There’s never a doubt. So I will–We have Yar from White & Case. Um, W– Yar now is I guess global head of White & Case’s IP group.
Used to be in the patent litigation ranks, now has emerged as both patent litigation and trade secret litigator. So with that, Yar, I will turn it over to you.
[YAR CHAIKOVSKY]
Thanks a lot. Appreciate it, Wayne. Um, re– really quickly, just to introduce, although others can say more, we’ve got Tom Spranklen from WilmerHale on my left then Rajiv Patel, partner at Fenwick & West, and then Camille Herdy from Rutgers Law on the panel.
If others want to make other comments of themselves, but won’t do that given we have our 45-minute clock that’s staring me in my face. Um, really quickly and, you know, obviously covering what Wayne just mentioned, I mean, we’re at the Advanced Patent Law Institute, and we’re gonna be talking about trade secrets, but it’s something that we’ve had to deal with in a post-AIA world and we’re migrating where technology’s going and AI, blah, blah, blah. I think one of the interesting table stakes for this is maybe some statistics with respect to trade secret cases. And with that, I’ll pass to Camille.
[CAMILLA HRDY]
Absolutely, yeah. So I think there’s a couple of reasons we’re here.
One is as you all know, right, there is now a federal trade secret law, De– Defend Trade Secrets Act passed in 2016. Also, there have been a lot of you know, potential weaknesses that we’ve been talking about today– Mm-hmm. In patent eligibility and enforceability.
And then third is probably because of AI. The trade secret AI interface is very interesting. And since I’m allowed to say one more thing about it myself, if you are interested in AI and trade secrets, you can download–I have several articles on this SSRN and then HRDY, and you’ll find those articles. But in terms of statistics, so since the DTSA was passed, the average number of federal trade secret cases brought per year is around 1,400, 1,400 a year.
There was an initial rise in cases right after the DTSA was passed just ’cause you suddenly had this automatic federal forum, but it’s now leveled off around 1,400 a year. Very interestingly, the win rate for cases that go to trial is very high, okay? So most trade secret cases do not go to trial, right?
They settle, you have an early injunction, and the case kind of just goes away. But when they do go to trial, it’s over 80% win rate for the plaintiffs, okay? That’s very significant.
Um, and then the third statistic I’ll just put out there is damages. Damages awards have been getting higher. They are so the median, so sort of like what most cases look like, is actually under a million, but the average is over eight million, and that is because you have some very, very, very large trade secret verdicts coming out that rival patent cases. So stop there.
[DAN ZEUNERT]
Okay. Thank you. I mean, a little bit of table setting.
And then next wanted to hit kind of a topic of defining what is or is not a trade secret in the era of AI in particularly, and maybe I’ll start with Rajiv in terms of, you know, things such as, I mean, and you can hit on what you want to, you know, whether AI generated c– you know, confidential information rises to trade secrets economic value for it, things of that nature.
[RAJIV PATEL]
Yeah, I mean, I think the primary thing that we’ll see oftentimes these days when we’re talking with companies about, “Hey, my AI created this trade secret,” well, if you think about how a lot of large language models work, by definition, they’re actually creating new materials, right? They’re taking in materials from elsewhere and creating new materials, and companies are saying, “That should be my trade secret in this context.” Unlike patent and copyright where I need a human to be in, basically the author for copyrights or the inventor for patent, trademark has no requirement of a human actually producing it in that context.
And trade secrets has no requirement for the human actually producing it. So companies are beginning to take a view where, “Hey, if I’m training my model to do something, and it spits out something new, that should be my trade secret that I keep,” right?
Whether it’s a new piece of code, et cetera, that goes along with it. Now, of course, that alone, the fact that it’s creating something that’s new that didn’t exist before doesn’t necessarily mean it’s a trade secret. As Yar just pointed out, it has to have those other elements that we require in a trade secret, such as economic value.
And so that has to be another element that we have to prove, and then same thing, you’ve got to also take a look at whether it’s something that’s readily ascertainable in terms of is what was created, something that, hey, it’s generally known or not in that context. And that’s actually where it starts to get interesting because it’s that what does that mean to be readily ascertainable? Especially with AI, when I can now use another AI to go reverse engineer what just went on, potentially and figure out– is that something that’s new or not?
Because here’s my spitting out of what I think is what you just created as the new AI.
[CAMILLA HRDY]
Yeah, great. No, I totally agree. It’s so interesting, and I love that Rajiv brought up the point about the fact that you don’t need a human creator, right? And that’s gonna be very significant because we’ve seen in the patent copyright space, no, you gotta have a human inventor.
You don’t for trade secrets, but there are a lot of limitations here. One, we were just talking briefly about ownership and who has standing to sue. We’re not gonna get too deep into that, but I will say DTSA says, the trade secret claimant has to be the owner, okay? State standards tends to be lax, or a possessor can usually sue.
Um, but the bigger barrier is what Rajiv was mentioning is, is you do have to show that your inf– you don’t have to show it’s novel and not obvious, Okay? So, we don’t have to use those words in this panel, but you do have to show the information is not generally known and not readily ascertainable to others through proper means and that it derives economic value from secrecy.
And so at the federal level, you do have to show information isn’t readily ascertainable, and in most states, you have to show that, notably not in California, but a lot of other doctrines perform the same function. Long story short, if another AI model can easily ascertain what the information is, may not be your trade secret, but we’re still working through this stuff, and these cases are only just coming out.
[TOM SPRINKLING]
And if I could jump in just for a second. So you’ve heard from the academic, you’ve heard from the transactional guy, I’m the litigator on the panel, and I am constantly faced with a barrage of different cases, different rules across jurisdictions.
So as Camilla mentioned, you know, one thing to think about here is that for many, many years, we had something called the Uniform Trade Secret Act, which most states largely followed, with some important exceptions. Then, about a decade ago, we switched to the Defend Trade Secrets Act.
Again, very similar with some distinctions. But when you start to look at the cases, a lot of different federal courts will draw from the state law precedent, even while there’s a whole new body of federal law emerging under the DTSA.
It can get very confusing very quickly. One thing we’re gonna talk about, I think, a little bit later is how you determine what you have to plead, for example, for a trade secret.
And that is a very hot issue in the Ninth Circuit, among other places. But I think some of these issues with AI in other areas are very confusing, very complicated because we don’t have a court like the Federal Circuit where these issues go up to, and they give a decision, and then that’s the answer. We have a bunch of different circuits, we have a bunch of different state courts, and so not only are these issues new and novel, but you won’t necessarily get one answer from the same jurisdiction.
[RAJIV PATEL]
Yeah. I think one area that’s getting interesting is, and it crosses over with that litigation is what does it mean to be readily ascertainable in this AI world, right? Because nowadays you can plug in stuff into AI and try to figure out what is going on.
So could you get the Coca-Cola trade secret formula? Theoretically, you could. But is that going to be readily ascertainable? Don’t know.
[CAMILLA HRDY]
Right.
[YAR CHAIKOVSKY]
I think you want to comment like on CompuLife case, etc. And that’s implemented there in terms of improper means/readily ascertainable.
[CAMILLA HRDY]
Yeah.
[RAJIV PATEL]
And when being readily ascertainable, one of the things is, and Camilla mentioned this earlier, just shortly, which is one of the things that some of the courts have done, and CompuLife did this, was by a human, right? And so, that becomes a critical element. So if you’re not familiar with that case, there was a case in which someone was going out and scraping a website relative to all insurance quotes to put together, kind of their offering and the like. But it was that scraping part that the court took issue with relative to whether or not that should be something that’s readily ascertainable.
The data’s out there. If a human wanted to, they could have just written down all the quotes that were right on that site. But because they used a bot to get all that data, court didn’t like that and didn’t consider that to be readily ascertainable.
[TOM SPRINKLING]
Well, actually, can I make one slight correction on this? So and maybe Camilla was about to jump in on this. I think it was potentially improper.
[RAJIV PATEL]
Oh, potentially improper, right. They haven’t quite ruled it yet.
[TOM SPRINKLING]
They didn’t address readily ascertainable question.
[RAJIV PATEL]
Didn’t go the full route, but it was leaning in that direction.
[CAMILLA HRDY]
Well, so but then follow on they did, so eventually.
[RAJIV PATEL]
In the second case.
[CAMILLA HRDY]
Yeah. So basically, the plaintiff won, right? And there are two issues, right? One is it readily ascertainable? Is it a trade secret at all?
Court very clearly says in that case that just because something is publicly available does not necessarily mean it’s readily ascertainable through proper means, right? So here, the way the defendants got it, they did a variety of naughty things, but the main naughty thing they did was hire a woman, the court called a hacker to design a bot to automatically get insurance quotes from the website. And so the claimed trade secret wasn’t just the individual quotes, it was the entire combination, this huge dataset, and the court says, “Look, a human could have gotten individual quotes easily through the site and largely for free, but they used a bot.”
So that was bad. But the second issue, and so not readily ascertainable by proper means, right? And I think they effectively did hold on that because we did get a holding that there were trade secrets and that they were misappropriated.
The second issue, it’s absolutely closely related, is have you used improper means? And you have to show both. You have to show you have a trade secret that’s not readily ascertainable through proper means, and you have to show the defendant used improper means to get the information. And this case, which I recommend anyone reading, it’s really one of the most important trade secret cases since DuPont versus Christopher which was that, you probably know this very famous case where two brothers fly a plane over a plant to see what’s inside.
They’re in public airspace, right? They’re not breaking any laws. Court says that’s improper means. That’s essentially what happens in CompuLife, right?
It wasn’t clear that they were violating any other laws, and then correct me if I’m wrong, but they lost on their copyright claim, right? So they won on the trade secret claim and that’s because we have this kind of roving concepts of it just looks bad, it’s improper, right?
[TOM SPRINKLING]
But just to pause a little bit though on this. Yeah, yeah. I mean, just going back to that theme about who knows kind of, it will depend heavily on the jurisdiction. Compulife is an Eleventh Circuit case.
[CAMILLA HRDY]
Yeah.
[RAJIV PATEL]
Yeah.
[TOM SPRINKLING]
And of course it doesn’t govern anywhere else.
[CAMILLA HRDY]
Absolutely.
[TOM SPRINKLING]
And so I do think, and it’s foundational, it’s cited in a lot of places, but I do think a question you might have going forward is what will other courts do in this circumstance–
[CAMILLA HRDY]
Absolutely.
[TOM SPRINKLING]
–when faced with something like AI? So one case that came to mind is the Kyllo case, which we all read in law school about the Fourth Amendment, and you might all remember this. This is the police use kind of heat wave detectors on the house and that’s deemed a search and it’s deemed a search because that’s kind of technology only the police had and not something the public would have.
I wonder whether that same kind of methodology might be used in other cases. It wasn’t used in CompuLife, but if you start thinking about kind of what are the reasonable expectations of someone–
[CAMILLA HRDY]
Yeah. Have they changed in 2025 versus 2020 versus 1995?
[YAR CHAIKOVSKY]
Well and even 2030.
[TOM SPRINKLING]
And 2030, sure.
[YAR CHAIKOVSKY]
I mean are you know the bots you know being improper at this point in time there’s improper. I mean, that’s the problem with the law in this area.
I mean, they’re just doing it more efficiently and more effectively. Humans could have done it. It would have taken a lot longer, or you would have had to employ, you know, an insurmountable amount of humans.
You know, it’s interesting. One of my partners I think is here. We’re on the appeal of the, you know, you know from a copyright perspective, it’s not a trade secret case, but we’re on the, you know, Ross Thomson Reuters case. And the reality is, when you’re amalgamating these headnotes that Thomson and Reuters found so find so precious, you know, you know, a human can aggregate that without a problem.
But the fact that, you know, you put it into a computer and the computer’s using it to train an LLM effectively, not for a Gen AI output, oh my God, you know, all of a sudden, because you’re doing it faster. But I could go to the law library here at Stanford and get those exact same head notes in the same way and they’re publicly available.
[CAMILLA HRDY]
Yeah.
[RAJIV PATEL]
I mean, the other thing that’s interesting, it is, I agree with you on the left, Eleventh Circuit’s case, it’ll be interesting to see how other courts look to that or not going forward. But arguably, they didn’t use a lot of reasonable measures to even try to keep all that information a secret.
And so, why couldn’t they go do that? There was no terms of service, for example.
[CAMILLA HRDY]
There was not. That’s exactly right. They did not initially have a terms of use that prohibited that activity.
They put one in after the case started, obviously. But they didn’t initially have that, and it’s worth noting that the terms of use does matter in these cases because courts will often look to was it prohibited by the terms of use in deciding whether it was improper or not, and you know, looking forward to 2030 or even to 2025 if you think about what’s the next step of this, right?
It’s trying to hack into AI models like ChatGPT and so forth, and we’ve already had some cases, or really one line of cases about that. But I think copyright life is gonna be very relevant here.
[TOM SPRINKLING]
Sorry, I can’t see you while you’re talking. There are layers upon layers of that, too, right?
Because one thing you might ask is, “Well, what type of AI are you using,” right? So, if there’s a publicly available type of AI and it’s very easy to locate this information in the compilation, that to me strikes me as maybe a slightly easier case for readily ascertainable. What if you have a proprietary AI system?
What if you come up with a thousand-word prompt that only you come up with and nobody else can possibly think of? So, I still think there are gradations in this as the technology advances.
[RAJIV PATEL]
Clearly, it’s fact-specific.
[TOM SPRINKLING]
Yeah, yeah.
[RAJIV PATEL]
Absolutely, it’s fact-specific, and I think when you’re thinking about like how you’re, at least with the way we talk about it with our companies when we sit down with them is you got to do as many steps as you can to help take those reasonable measures, and then to help with those gradation arguments later on. But if you don’t have any of that, then you could run into a case where you just don’t know where it’s gonna open up into, given that it’s still forming as law.
[YAR CHAIKOVSKY]
How about we migrate onto assertion of trade secrets and more particularly, let’s say, identification of trade secrets, whether it’s a pleading stage, perhaps later. I’m gonna have Tom kick that off and–
[TOM SPRINKLING]
Sure.
[YAR CHAIKOVSKY]
–get into our various standards, whether DTSA, California or otherwise.
[TOM SPRINKLING]
You’re music to my ears. So as, I, I will be, I’m only speaking for myself here. I generally tend to represent defendants, so I will try to take this from a neutral perspective, but I have a little bit of that in the back of my head. So California, which is of course where we are right now has what’s called the California Uniform Trade Secret Act, and it has a requirement that before discovery begins, you have to identify your trade secrets with reasonable particularity.
Now, what does that mean? If any of you can come up with a definition of that, I would love to hear it, but the basic idea, the basic policy concerns is that you should, the defendant should know what the trade secrets are before the case begins. Otherwise, if you start discovery, you can go rummaging around.
It could be a fishing expedition. So that’s great.
That’s fairly well-established law in California. Now, the Ninth Circuit has started getting involved in terms of what this means in the context of the DTSA, which again, very similarly worded to the California law, and there’s been a succession of cases.
There was a case in 2020 called Eteleclear, and there was a very recent case called Quintara, and Quintara holds that the DTA– DTSA standard is different. Don’t fully understand how it’s different.
I’m sure the Ninth Circuit will tell us too.
[YAR CHAIKOVSKY]
Well, just to clear, California– Petition of particularity, Right?
[TOM SPRINKLING]
So, it’s, they use the term, I’m monopolizing this very interesting topic called–
[CAMILLA HRDY]
Well, Just to be clear, there’s the California’s–
[TOM SPRINKLING]
Yes.
[CAMILLA HRDY]
Statute that says–
[TOM SPRINKLING]
There’s the California statute– Which says reasonable particularity, and there’s a fascinating case, which I commend to you all called Quintara from a couple months ago from Judge Johnstone on the Ninth Circuit, which says the DTSA applies a different standard, which is sufficient particularity
[CAMILLA HRDY]
Yeah.
[TOM SPRINKLING]
–which side note, seems to be drawn from California case law, but I won’t–
[CAMILLA HRDY]
Mmm, I think it’s drawn from–
[TOM SPRINKLING]
We could disagree. It’s drawn from INAX.
It’s drawn from INAX. In any event, I will stop talking there only to say that this is a front-line issue that we confront in all these cases. An early question in a lot of trade secret cases is, can you file an early motion to dismiss because nobody knows what the heck the trade secrets are?
This most recent decision from the Ninth Circuit would suggest it needs to wait till the summary judgment stage after there’s been discovery, after there’s been different details added. I will now pass over to other people who have, I’m sure–
[CAMILLA HRDY]
Oh, no. I couldn’t agree More, I mean. It’s actually a very big practical issue.
To me, it’s not like the most interesting issue in trade secret law, but it’s very, very important to trade secret lawyers because you do need to know, like, how do you file your case without getting it dismissed right away? And I think it really has to do with timing.
That’s my interpretation of all of this is that in California, because of the statutory reasonable particularity rule, which we all understand reasonable particularity, sufficient parti– particularity. Those words themselves mean nothing, but the statute does say that you have to identify your trade secrets early in the case, before you enter discovery, right? And the policy there is so that the other side knows what they’re being accused of and so that we don’t go, on a fishing expedition and discovery balloons, et cetera. But the DTSA doesn’t say anything about that, right?
It does not have that reasonable particularity language or any, it doesn’t mention identification at all. And so, I think, I actually think the outcome in this case is right. I think that the court is saying, “Look, California has a statutory rule, says you need to do identification very, very early.”
The DTSA doesn’t have that statutory rule, nor do many, many, many, many states where the standard is just laxer. And it’s not that you don’t have to identify your trade secrets, it’s that you can do it later. I think the court might exaggerate by saying, you know, this usually isn’t gonna be figured. It’s a question of fact, usually won’t be decided until summary judgment or trial.
I think that might be an exaggeration, but still you can do it later, so what I’m telling my students, ’cause I have to teach this stuff, is like, under the federal– Quintara suggests, and that’s just the Ninth Circuit, but they’re suggesting that the DTSA is a bit laxer than California. But frankly, that’s been kind of the trend in a lot of other cases, too.
You will see other circuits that are also not necessarily saying, you have to identify everything right away before trial–
[TOM SPRINKLING]
It’s an interesting–
[CAMILLA HRDY]
–or before discovery.
[TOM SPRINKLING]
It’s an interesting question. I might push back on the question of whether it’s rightly decided or not, but I will defer that for this panel.
But what I would say is you’re right. It’s coming up in a lot of different circuits across the country, and there are several interesting more academic issues that come up with that. For example, is it a question of law, right?
Quintara holds it’s a question of fact, how detailed the trade secrets are, but judges look at this kind of stuff all the time, right? And they think about like, “What is the scope of the patent right?
Why should this also be a question of law?” That’s something that I think has not been fully settled.
[CAMILLA HRDY]
That’s a good point,
[YAR CHAIKOVSKY]
Can I ask a question, just ’cause the one thing I also disagree with is how many people here are in-house, actually at a company? Okay, right.
And why you should care, obviously, and why this issue is top of mind is expense. I mean, you know, it actually is one of the most significant issues in trade secret litigation that we deal with, because as opposed to a patent case, which has its metes and bounds with the claim, and we kinda know what we’re dealing with, subject to Markman, which is kind of, you know, we can debate what Markman’s become today. But you know, here we have just this obtuse IP right that is ill-defined and when are we gonna get it defined?
And we got a court saying, “Oh, later,” right? Where the California law is, well, there’s no discovery until it’s defined sufficiently, right?
[TOM SPRINKLING]
I’m happy to take the California position.
[YAR CHAIKOVSKY]
Right. And so, you know, here the worst thing is the Ninth Circuit saying, “Not California. Different later.” And so, from in-house and especially if you’ve been involved in trade secret litigation, the costs, I mean–
[RAJIV PATEL]
Go up.
[YAR CHAIKOVSKY]
–necessarily rise, I mean, I’m not gonna say exponentially, but significantly. You know, and the cost of trade secret litigation is we just heard the stats at the outset. We’re like, “Hey, we’re gonna have like 80% of these things head to trial.” You know, you gotta get this reduced somehow, and one of the methods we use to reduce this is this identification and trying to, you know, cut the case down.
And the case law, at least on the DTSA side, if you’re on the defense side, it’s not going the right way for early identification, et cetera. And so if you’re a plaintiff, you love it.
[RAJIV PATEL]
Yeah, absolutely. I mean, it’s not gonna be just, what you gave were the damages awards, just to get to even through discovery is gonna easily cost you a million bucks just to try to figure out what is the trade secret you’re arguing over.
[YAR CHAIKOVSKY]
More.
[RAJIV PATEL]
Yeah, probably more, right? At least a million is what I’m getting at, right? It’s killing the companies that are trying to figure out like what is there. Plus on top of that, you also have the, there’s only two states, I think, that have the reasonable particularity right?
Is California, and Massachusetts, and arguably, South Carolina, maybe. So it’s gonna be interesting to see if more states go in the federal route, right? Which is gonna mean less certainty and definitely gonna be more impactful as to the budgets.
[CAMILLA HRDY]
Yeah. I guess I would just say that just because you’re saying California’s rule doesn’t apply to federal law or everywhere, that doesn’t mean that all cases are gonna go to trial. I think whatever sufficient particularity is, I do think it means something. We do still have an identification standard and if you look at cases like Oakwood and so forth from other circuits, I do think it’s possible to kick out cases early. I just think the California standard, Why would the California standard apply to the DTSA?
That part of the opinion has to be correct.
[TOM SPRINKLING]
I would raise similar questions about why InteliClear treated it. But you know, I mean, if we’re thinking to defend Judge Schonstone and his decision for a second, I think the other thing that jumps out to you is he suggests that maybe you could have a very quick summary judgment decision, which it doesn’t save you the problem of getting to motion to dismiss. I recognize that, but the suggestion from the Ninth Circuit is you tee this up very, very early in a summary judgment posture rather than in a motion to dismiss posture.
It seems to be the way they’re heading.
[YAR CHAIKOVSKY]
Yeah, yeah.
[YURI ZHUKOVSKY]
That’s, I was just in a courtroom in New York and applying Second Circuit law with sufficient particularity and someone’s, we’re actually the plaintiff in that case and, you know, the judge is struggling. He’s struggling with what is sufficient particularity. I mean, it’s part of also the problem is there’s not enough clarity. So if someone wants to bring this, whether it’s at the motion to dismiss or the summary judgment stage, depending on the trade secret, the type of trade secret, I mean, here we’re talking about AI code, actually relating to mass transit.
You know, it’s very hard for the court to discern what is sufficient particularity, and so then you’re gonna get into fights about it, fights about when, and all of a sudden, you’re fighting all the way to the end of discovery. This is where, again, I’ll disagree with our professor. You’re fighting to the end of discovery if you’re on the defense side.
If you’re fighting to the end of discovery, you’re more in trouble. Sure, you’re hopeful at summary judgment stage, but obviously, we want to try to pare this down before we get to that point in time.
[RAJIV PATEL]
Well, you also have to worry about, I guess, and then I haven’t seen it, but isn’t, I don’t know if anyone on this panel has, statute of limitation is only three years, and if you don’t define what it is in that context, both for the DTSA and also California, do you run the risk of losing your case if you’re a plaintiff?
[CAMILLA HRDY]
Yeah, yeah. We were gonna talk about the statute of limitations as well. Should we?
[YURI ZHUKOVSKY]
Yeah, you got to cover it right now. Sure. Yeah, let’s go.
[CAMILLA HRDY]
Okay, yeah. So another interesting issue is how quickly the plaintiff has to sue, right? And so the DTSA has a three-year statute of limitations, but it has a discovery rule, so it’s three years after the plaintiff discovered the misappropriation or could using reasonable diligence have discovered it, right?
So basic discovery rule. And the case I really like, I think other people wanted, maybe wanted to talk about a different one. The one I was gonna talk about was Insulet versus Eoflow, which is pretty interesting on this.
This case did go to trial, plaintiffs prevailed, and this, these were insulant patch pumps, so important product competing product case. Insulet’s the plaintiff, some of Insulet’s employees go to EoFlow. Eoflow comes out with a competing insulant patch pump, looks pretty similar.
And the plaintiff did sue but they sued more than three years after, according to the defendant, they could have learned about the misappropriation. And the thing that the defendant said plaintiff knew and that put it on notice was that the defendant presented a prototype of its product at an industry conference, okay? And so the idea says the defendant will combined with the fact that, you know, your employees now work for us, you saw this prototype at a conference, you should have sued within three years after that, but they waited a little longer. The jury found for the plaintiff anyway.
The court upholds that and says, you know, “Mere suspicion isn’t enough, seeing a prototype from ‘afar’ shouldn’t necessarily tell you it’s misappropriated, you know, trade secrets.” And in fact, I think there was kind of a good faith notion here, like, “We’re gonna take them at face value, they said they’ve independently developed this, they, you know, all companies should be given a little bit of good faith, and why should we necessarily think that it’s, with stolen IP?” So that tracks other cases I’ve seen, like something like defendant has asked plaintiff for a license and plaintiff says, ‘No, you can’t have a license.’ Does that put you on notice that there’s gonna be misappropriation? No. Like, we should kind of assume good faith, I think is kind of the, but, yeah, Tom?
[TOM SPRINKLING]
Well, I was just gonna say one quick thing about Insulet, though, is, so first of all if you’re a plaintiff, file your case early. Don’t wait, you know, I mean, gather facts, but be conservative on this because it’s a shifting area of the law, and I would never suggest otherwise. That said, I do think the one notable thing about Insulet, is that the rule it announces, it has a pretty exceptional paragraph where it says, “I recognize no other court interpreting the DTSA has come to this interpretation of the statute of limitations.”
That is, something other than inquiry notice. And it applies the notice, a standard it takes from a Supreme Court case in a different context called Merck, I think. And I actually don’t think I fully understand some of what the court says could be read in its analysis section, I think is something close to inquiry notice, because it doesn’t grant summary judgment for either party.
It says, well, you know, there’s some facts one way, some facts the other way. But I do think this is a place where courts are split and still trying to figure out exactly what the rule should be.
[CAMILLA HRDY]
Absolutely.
[TOM SPRINKLING]
I will say again, in California it is, it is the diligence test, it’s the higher standard so that’s pretty well covered. But on the DTSA, I’m not certain.
[YAR CHAIKOVSKY]
But you say higher standard and then you should have known standard, et cetera, you know, what would you say with respect to that prototype?
[TOM SPRINKLING]
Well, as a defense lawyer, I would say obviously they should have known and therefore the statute of limitations has run. On the basis of the facts, I think it’s a hard call.
[YAR CHAIKOVSKY]
Right.
[TOM SMEDINGHOFF]
And I think a lot of these statute of limitations questions are gonna be very, very fact-intensive, and it may depend on who has the burden of proof. Usually, it’s an affirmative defense. In California, at some point, it switches to the plaintiff if you make certain showings.
[CAMILLA HRDY]
Would you agree that if there had been downloading activity discovered, The fact that we got this prototype, looks similar from afar. We’ve got the fact that their former employee is now with the defendant, would some kind of suspicious downloading activity, would that clinch it?
And then you should discover it.
[TOM SPRINKLING]
I’m unwilling to make an advisory opinion at this time.
(Camilla Hrdy laughing)
But I certainly think it would be a closer case. It’s helpful. It’s helpful.
[YAR CHAIKOVSKY]
Is there anything we do transactionally in this area?
[RAJIV PATEL]
Yeah, I mean, I think the thing that’s screamed for me was just like the layering that you need to do relative to the IP you should be doing. I think trade secret cases alone, you’re just hearing. A lot of unknowns in them, right? And so, in this case, being able to say like, ” Oh, in addition to that product, we’ve got a patent on it, we’ve got copyrights in the code that’s within it,” et cetera.
Whatever you’re doing, layering these cases is probably gonna be more helpful if you’re on the asserting side, the plaintiff’s side, that is. And as a defendant, you know, in some cases, that’s gonna make you a little bit more nervous, too, because now you’re not just dealing with all of the issues involving the costs of the trade secret-related issues, but now you’ve gotten these other cases that also are, we all know patent cases are expensive, and now copyright cases are getting expensive too in that context.
So, I think layering all of this together as part of the early stage as a strategy, you need to be thinking about as a company for a lot of the in-house folks here.
[TOM SPRINKLING]
The other thing we haven’t spoken about is that an ongoing misappropriation kind of counts as one misappropriation. So I suppose if you had a purported misappropriation that started in the year 2010 and continued all the way up to 2024, you wouldn’t be fighting with these difficult issues.
So that’s also worth considering as well, if it’s an ongoing course of conduct.
[RAJIV PATEL]
Yeah.
[YAR CHAIKOVSKY]
Anything else that you do on the statute of limitations from a contractual point? You know, is there anything like an owner of trade secrets could do to kind of make it more readily apparent that the employee’s taken off, let’s say, developed something that’s got a prototype that’s substantially similar?
Anything?
[RAJIV PATEL]
I mean, clearly your employment agreements are gonna articulate in there that you are the company, your employee is the owner of those trade secret. Helps you from the perspective of the DTSA because they define these trade secrets in the context of the owner.
Doesn’t necessarily help you from California state law or other Uniform Trade Secret Law states out there because they talk about things in the context of possession of the trade secret, and that’s not necessarily the same as being the owner of the trade secret. So it gets a little bit trickier on the state side relative to these issues, because there you just, as the person who developed the trade secret, if you can argue that I was the one who possessed those, you’ve got rights under California Trade Secret Act, whereas if you go to federal, the DTSA, you gotta show you’re the owner of it. So there’s a little bit of a so in the contracts, while you can have it as the owner, you still have to worry about the possession side of it too.
[TOM ZICKELBERG]
And more than one person can possess or own a trade secret, right? If it’s independently developed, 10 people could possess it as long as they meet all the other standards. So it’s a little more fungible in some ways, and something like that happen–
[CAMILLA HRDY]
I do think it’s worth mentioning the really interesting ownership case. It, it goes in the weeds, but it is a Snyder versus Beam 2025 Tenth Circuit case, where the fact pattern was that an employee who had worked for another company, Guardian, goes to his new employer, uh, Beam Technologies, and he brings with him from his former employer trade secrets, a client list from his former employer.
And he has it at his new employer, and he accidentally distributes it to his new employer, then he gets into a fight with them, too, and he leaves, he sues the second employer, they misappropriated his trade secrets ’cause they obviously took the client list, he had very generously brought. And you would think, “Well, that’s ridiculous. How can you sue on a client list that you took from your prior employer?” To me, that’s just, like, patently ridiculous.
[ERIC CHAIKOVSKY]
Yeah.
[CAMILLA HRDY]
But that is where the law has gotten us, because yes, DTSA says you have to be an owner. State laws don’t say that for almost all the UTSA versions in the states.
They talk about possessor or complainant, person. They do not say you have to be an owner. And so we’ve gotten this ridiculous rule that a mere possessor can potentially sue for trade secret. So I could steal Rajiv’s trade secret and then sue you after you take my trade secret.
I think it’s ridiculous But you know, that’s kind of where we are with the state standing rules, is mere possession can be enough, even if it’s derived. And Snyder versus Beam seems to support that. It says under the DTSA you got to be an owner, but under Colorado trade secret law, which this case was under, this guy might have had standing to sue. He still lost the case ’cause, you know, obviously he was gonna lose, but he didn’t take reasonable measures.
He distributed very freely to his current employer.
[RAJIV PATEL]
This goes like, I mean, every type thing you read about, right, is like when you’re at a company and you signed that agreement, employment agreement, and the like, it says like, “Oh, this is all company property,” et cetera. And then customer lists and contact lists are always included as being like, of course that’s company trade secret.
And yet you’ve got this–
[CAMILLA HRDY]
And so to be clear one of the really weird things was that the original guardian entity wasn’t in the case. If they’d been there, if they’d had the ability to speak up and say, “No, no, no, no. We own this.”
Then it would just be a basic employee ownership case, and obviously, they would say, “We own this. It was developed on our
[RAJIV PATEL]
on our time. on our time.
[CAMILLA HRDY]
And this also, but they weren’t there.
[TOM SPRINKLING]
This also makes an interesting point, which is I’m, this is a sophisticated audience, but um, sometimes when, when folks say the words trade secrets, they think something that’s like a patent but isn’t quite patentable. So they think it’s something kind of AI-ish, a new cool machine, or something like that.
It could be a client list. It could just be three names written down. It could be a formula for Coca-Cola or oil. It spans all kinds of IP rights.
And one reason why it’s very interesting to do, some of these cases end up looking more like kind of like classic business cases, you might have torts involved. Some of these cases are patent cases, they have the tech side added onto it. So it can kind of go all over the map.
And I think sometimes people get into trouble because they don’t think, maybe this is a trade secret before sharing it.
[CAMILLA HRDY]
Yeah, and it’s worth noting on the stats over recent data suggests over 40% of the federal trade secret cases do involve business relationships like client lists and so forth. It’s very common.
[TOM SPRINKLING]
Yeah.
[CAMILLA HRDY]
Not as interesting to IP lawyers, probably.
[TOM SPRINKLING]
No, and speaking of do we want to talk about damages next?
[YAR CHAIKOVSKY]
We, yeah.
[RAJIV PATEL]
I think– Well maybe
[TOM SPRINKLING]
Before we get to those, unless you got, you got anything else– One more thing, I was going to say is, and then let’s pivot to damages.
[RAJIV PATEL]
Interestingly, though with AI now, there’s now a lot of discussion about, well, I can recreate that list using these AI models.
[CAMILLA HRDY]
Exactly.
[RAJIV PATEL]
Et cetera, and so should it be a trade secret anymore? Are we back to having to define whether or not that should even be a trade secret because it’s going to be readily ascertainable using a lot of the AI systems that are out there, and may not rise to the level of saying, well, that’s beyond human capabilities or whatnot. Because there’s so much more information out there, and AI is just helping me organize it. That I’m recreating it.
[YAR CHAIKOVSKY]
Okay, you want to start damages, Camilla?
[TOM SPRINKLING]
Uh, well, all I was going to say and I, I think others may have more to say on this than I do, is one reason why damages are on the rise in trade secret cases, and I think Camilla has statistics on that she’s already given, is because they’re often very close to things that are in the patent context, but maybe they’re not patented because the information the owner doesn’t want to share the information publicly, or maybe it falls under section 101, it’s too close to mathematical formula or something like that. But the amount of money at stake in these cases now rivals or dwarfs patent cases. And that’s also very notable because the case law is very underdeveloped. So I want to just, one thing.
And then we’ll pass it off to the rest of the panel. As you all know, in patent law there’s apportionment, right? The patent owner must show the value of the infringing the patent in the infringing product. In trade secret law, it’s very mixed about whether there is an apportionment requirement, who has the burden on it.
Some people have gone so far as to argue it’s enough to say your product has my trade secret in it. Now you need to tell the court how much of it is not attributable to the trade secret.
So you have very high dollar amounts, and you have a lot less defenses for a defendant in this context.
[YAR CHAIKOVSKY]
Just really quickly, it, I mean, we’re all doing patent litigation, everybody doing it. I mean, obviously, we’ve seen over the last whatever it is now decade in terms of the Federal Circuit’s pairing of damages awards. We kind of count on the large damage awards being reduced for one reason or another, being sent back down, remanded, remitted, et cetera. You, we don’t have this in trade secret law.
We may one day. But we don’t, right? We have the various circuits around in the United States, and given what Tom just mentioned in terms of what people are doing as, as people do apply, for example apportionment and kind of reasonable royalty analysis, but you also then have the big unjust enrichment component.
And the bigger numbers tend to come from the unjust enrichment component. And that one’s a lot harder to let’s call it fight back and the appellate court’s going to be dealing with that, these large numbers coming out of these cases under unjustement, unjust enrichment, among other theories.
And oh, by the way, what you’re starting to see in these cases with DTSA or RICO claims, you know I’ve been doing that on both sides because you’ve got conspirators and all of a sudden, you’ve got treble damages, you are in the mix automatically so you’ve got a DTSA with a RICO claim, and it’s all of a sudden off and running. So you know, numbers are big here so beyond the expenses we already talked about, the ill-defined IP, et cetera, the numbers start to get bigger.
Which also then raises the stakes and the cost of litigation.
[RAJIV PATEL]
Although, and the, I mean one of the reasons numbers may be bigger, is there’s just look at Silicon Valley in general, right? There’s a lot of movement of really top-end talent in the AI space right now. And that movement is coming at a high cost relative to the people who are acquiring that movement, right?
[CAMILLA HRDY]
There are going to be more trade secret cases in the wake of these AI movements,
[RAJIV PATEL]
That are losing that talent are like I can’t allow this to happen. I’ve gotta do something here, and they’re gonna make these arguments and say, you know, so you can start with and saying, “Look at how much they paid this person to go over there.”
[CAMILLA HRDY]
And why are they paying them that much?
[RAJIV PATEL]
Exactly.
(Camilla laughing)
[TOM SPRINKLING]
And a trade secret, unlike a patent, doesn’t expire. All you have to do is keep it confidential. And that, I guess, all you have to do is understating the burden on the owner. But a patent has a limited life. A trade secret does not.
[CAMILLA HRDY]
Disagree, but anyway. Just kidding. I won’t get into that.
[TOM SPRINKLING]
Statutorily, there’s no life on a trade secret. We could discuss the doctrine later.
[YAR CHAIKOVSKY]
Anything else on damages? Any comments? Anybody else with something?
[CAMILLA HRDY]
No, I mean, didn’t fully, did you wanna do extra-territorial issues, or we could also talk about the open evidence case, it’s interesting, but also could be interesting to talk about sort of the TikTok and iTera cases.
[YAR CHAIKOVSKY]
Before we do that, to make sure I check the box here, I, know Rajiv’s done a little bit of this, it’d be better to get come from all given here. We’re at The Advanced Patent Law Institute.
Just comments, and then we’ll hit the international aspect, but comments on people evaluating, you know, and they, we’ve threaded this through this. But just overall, the difference between trade secrets, patents, copyrights, as you see it today, and maybe I’ll start with the person who’s doing it on the transactional side first.
[RAJIV PATEL]
Yeah, I mean, historically, we’ve all known that, okay, when we’re looking at patents and stuff, general conventional wisdom was there’s a way of detecting it. I’m gonna try to find a patent, let’s say. That’s the way what most companies thought about it, and if I couldn’t, I was gonna keep it a trade secret.
Not necessarily sure that’s necessarily holding as the line these days, and there’s a lot more blurring of that. And the reason is, is because of the way information is moving and flowing is a key reason.
So we had a situation where we had some code developed by a company, and that code was what they considered to be a trade secret, but it just so happened that they, company thought, “You know what? We should also just go ahead and file a patent on this. We won’t file internationally. Rather, we’ll just keep it, you know, through the patent process.”
So it’s gonna stay confidential for perhaps three to five years depending on how long the prosecution process takes. What happened during that period of time, though, was that an employee left and uploaded that code into a GitHub so that when they went to their new employee, they ended up downloading it there.
Now you would think like, “Why would you do that?” But this happens. We’ve probably all run across situations like that where common sense sometimes doesn’t necessarily take root that easily. What was interesting was that prosecution had already been started and it got accelerated, got the patent issued, and suddenly it was not just a trade secret misappropriate, well, patent wasn’t it was a trade secret misappropriation case that was brought at that point. But also, as soon as that patent issue is gonna be layered on with the patent lawsuit that was there and ended up settling much quicker because they, the other side just didn’t wanna deal with that aspect of it altogether.
But it’s just showing that a situation where, like, oh, historically no one would have ever filed a patent there, they just happened to do one there, but it got the company thinking, saying, “Should we be looking at this more critically than just saying, ‘Oh, I can’t detect it, we’re just gonna keep it a trade secret.'” Should we look at it more critically and not just, “If we can’t get a patent, should we be looking at things like perhaps I should register the code there?” Because remember when you register the code at the copyright office, there is provisions there that allow you to keep some of that code a trade secret, besides you’re not also downloading the entire code into the registration office when you’re registering that code. So you could also layer on the copyright claim there too if you ended up in that misappropriation situation.
[CAMILLA HRDY]
Assuming you had substantial similarities, yeah.
[RAJIV PATEL]
Yeah.
[CAMILLA HRDY]
I mean,
[TOM SPRINKLING]
One thing that you noted that I thought you might get into is this does happen sometimes, where people have a trade secret. And then they file for a patent application, and they put the trade secret in the patent. You should not do that.
[RAJIV PATEL]
Do that, no.
[TOM SPRINKLING]
That’s just to be 100% clear. Especially now that we have published patent applications.
[RAJIV PATEL]
Yeah.
[TOM SPRINKLING]
I thought that’s where you were going,
[RAJIV PATEL]
Yeah. No. So functionality on the patent side, right? That’s what you’re covering there as opposed to the particularities of what is a trade secret, which would be some of the aspects of the lower level aspects of the code that’s in there.
But it’s that layered approach again that’s going in there. And same thing on the copyright, really. In the copyright, again, you’re gonna register it using those provisions relative to that, and yeah, well, it’s, that’s potentially if you’re just downloading the whole code, you’ve actually just copied it, right Yep,
[CAMILLA HRDY]
Yeah,
[RAJIV PATEL]
Yeah, yeah. Yeah. So it’s straight out there.
[TOM SPRINKLING]
And one other distinction I think that’s worth raising between patents and copyrights on the one hand and trade secrets on the other is, at least as of now, an AI could create a trade secret. And it would be a legally enforceable right. I mean, maybe there’s a district court case somewhere I haven’t read, but it’s certainly not something that’s been well explored.
There are cases now that say an AI cannot, you know– A patentable work or copyrightable work cannot be primarily derived from AI. I think, I think there’s a term of art I’m probably not using, but it has to be mostly human or sufficient human support. So it actually is a world where AI could do a lot more and create valuable resources.
[CAMILLA HRDY]
Yeah, yeah. And so that’s gonna put more pressure on trade secret
[TOM SPRINKLING]
Doctrine, exactly,
[CAMILLA HRDY]
Yeah. In terms of what can be protected, yeah. Very interesting.
[YAR CHAIKOVSKY]
Yeah. Happy to move on, you know, running a little short in time if people wanna hit the international aspects as you already mentioned, Camilla, in terms of you could start with the Itera–
[CAMILLA HRDY]
Oh, yeah. –idea?
Maybe just, I mean, not even going to the cases, but just say, you know, when you have a foreign defendant, it’s often gonna be the case that the DTSA may well apply because the DTSA applies if the, excuse me. The DTSA may not apply because what you need is a U.S. citizen or an act in furtherance in the U.S. But we’ve had a lot of cases, including iTera, but also recent TikTok case that settled, suggesting that the act in furtherance can actually be a wide variety of things.
So it could be something like poaching employees from a California, so say there’s a Chinese company who’s getting sued, but they poached employees from a California company. Okay, that might be enough. Also, even just not really having any U.S. activity, but then selling products after the fact, in the U.S., made with trade secrets that you got from those companies. That’s like barely minimum contacts in the personal jurisdiction Civ Pro world, but that seems to be enough in a lot of these cases.
So act in furtherance is something that’s developing. That’s kind of, I think, the big issue there is, are you gonna get your DTSA?
[TOM SPRINKLING]
The only thing I was gonna jump in to say is that you might all be wondering what happened to the presumption against extraterritoriality? And the answer is the DTSA, or rather the predecessor, kind of eviscerates it.
[CAMILLA HRDY]
It does. I mean, yeah.
I mean, and I think that’s correct. Like, you read the statute, and yeah, sure, it was hooked onto a criminal law passed in 1996, but it’s still the case that 18USC 1837 does say, right, if the, you have a U.S. citizen or act in furtherance in the U.S., this law will apply. And so I personally think the courts in those cases are right, that the presumption is overcome.
[TOM SPRINKLING]
Yeah. I mean, the only point I was gonna make is that it’s a statute that expressly says it, which I think is fairly unusual. Especially if you think about the sweeping nature of the rights that we’ve been talking about and the amount of money. I think what constitutes an act in furtherance is hotly debated and will be the subject of many interesting cases as we go forward. I think there’s, it’s the Hytera case, right, that says that an act in furtherance doesn’t even need to be a consummated act of misappropriation.
It could just be one tiny step, and what that requires is gonna be litigated, and maybe other courts will go the opposite direction and try to effectively, you know, enforce the presumption. I don’t know, but
[YAR CHAIKOVSKY]
Yeah, I mean, I was gonna go with Tom’s comment overall and for those that have been litigating trade secrets cases, the act in furtherance decisions, so far seem to be going more in the Hytera direction, you know? And now it’s playing it friendly, shall we say? But I would agree, we don’t have enough courts, let alone the Supreme Court commenting, despite there’s precedent for where that, the phrase came from. But applying it to the specifics of the case so that we have at issue, what’s at issue?
Because then what we’re talking about when you have these international cases, I don’t care whether they’re from China or any international aspect, I mean, it just allows for extraterritoriality in every trade, every DTSA case. And the damages number, though again, kind of constant theme outta my mouth. Whether it’s reasonable particularity, et cetera.
If you’re on the defense side of this and someone can actually make these arguments about act in furtherance, and that is the law, Seventh Circuit starting it, you know, we’re all of a sudden defending against multi-billion dollar claims. And gotta put more resources on it and more resources on defending the international damage calculations, and they’re asking the companies to then turn over their financials from across the globe. It just becomes a different escapade.
Uh, and I’m not sure that was what was intended when the DTSA was enacted is the delta.
(laughing)
[TOM SPRINKLING]
This just circulates, I mean the theme of this panel I think, has been if you have a trade secret question, there likely isn’t an easy answer. There’s gonna be different answers across different jurisdictions.
The law is still developing in nearly every area, and it could take a sharp left turn or a sharp right turn and we just don’t know. The Supreme Court has yet to take A DTSA case.
[CAMILLA HRDY]
And they denied cert in the CompuLife case, which–
[TOM SPRINKLING]
That’s true.
[CAMILLA HRDY]
To me was very frustrating.
[TOM SPRINKLING]
The CompuLife case or damages cases that have gone up, if you look at the Supreme Court’s precedent on trade secrets, it’s mostly a case called Kewanee Oil from the 1970s, which says that state trade secret laws are not preempted by federal patent law.
[CAMILLA HRDY]
Thanks.
[TOM SPRINKLING]
So there’s a lot of really interesting stuff that could happen, and so anything you hear, I think is just subject to further developments and arguments by academics and whatever.
[CAMILLA HRDY]
Yeah. And Josh, who has co-authored a what is basically a treatise in Understanding Trade Secret Law with his dad, and I can say it’s very, very good. I’m using it to prep for my class, Understanding Trade Secret Law by Josh.
[TOM SPRINKLING]
Well, I’m always, I should say, I’m replacing Josh Lerner on this panel, but I am Tom Sprinkling. My father is John Sprinkling.
[CAMILLA HRDY]
Oh, yes.
[TOM SPRINKLING]
He is written a very effective treatise that I co-authored, and he’s also actually written an article on trade secret in the artificial intelligence age, which was published in the South Carolina Line of Law Review last year, which I commend all of you and his thoughts are his own, but they’re pretty smart thoughts.
[CAMILLA HRDY]
But there are more recent articles on AI and trade secrets by me.
(laughing)
[TOM SPRINKLING]
Yes. No, yeah, for sure. For sure.
[RAJIV PATEL]
Do we have time for questions or no?
[IAN BALLON]
We can take questions during break. How about that?
[RAJIV PATEL]
Okay, we’ll know after. Thank you, everybody.
(audience applause)