An Empirical Look at Trade Secret Law's Shift from Common to Statutory Law

Abstract

Like many of its unfair competition brethren, trade secret law developed in the courts of England and the United States. In 1979, the Uniform Trade Secrets Act, affectionately known as the UTSA, was introduced. The UTSA has since become widely adopted - forty-six states now follow it.

The UTSA did not represent a complete break from the common law, and there is a lingering influence of the common law over core aspects of trade secret law, even when that law conflicts with newer statutory provisions. Anecdotal studies have considered the continuing influence of the common law, but, to date, no study has comprehensively or empirically tested whether and how courts rely on the common law in spite of the shift to a uniform statute.

This chapter, a contribution to a book on IP and the common law, is an empirically driven attempt to understand the continuing role of common law definitions and rules after adoption of the UTSA. The methodology was straightforward: gather observable data about the statutory and case law that courts rely on to decide trade secret cases. The result is a positive account of the common law’s influence on courts applying the UTSA.

While this study is normatively agnostic, the potential normative implications are apparent. If the UTSA is considered the better policy, and courts follow the common law rather than the UTSA, then courts are not implementing better policy - or vice versa.

The chapter by begins by briefly describing the shift from a common law definition of trade secret misappropriation to a statutory one. The remainder of the chapter develops a model to describe and test some descriptive questions that arise from the shift: Do courts follow the UTSA? When are they more likely to? Which courts are more likely to? What factors affect whether a Court will cite cases that follow the UTSA rather than the common law? These questions are answered through categorical analysis as well as a probit estimation.

Keywords: trade secrets, common law, shift, UTSA