Why Do We Have Trade Secrets?

Abstract

Trade secrets are arguably the most important and most litigated form of intellectual property, yet very little has been written that justifies their existence, perhaps because they differ so much from other forms of intellectual property. This article explores the history of trade secret law in the United States and examines why it is that every state has opted to protect secret information, even though such protection is antithetical to the policies of access associated with patent law and non-protection of 'facts' associated with copyright law.

In this article, I examine four potential ways to justify trade secret law. First, I consider property rights. I propose a different way to look at whether or not trade secrets are property, and conclude that further examination of the underlying bundle of rights is necessary for normative justification.

I then provide and respond to criticism of three independent normative justifications for trade secret law's bundle of rights: economic justifications, philosophical justifications, and populist justifications. Contrary to other areas of intellectual property law, none of these includes an incentive to innovate as a primary feature; instead, I expand on prior economic analysis that justifies trade secrets by examining the marginal benefits of the law, answering criticism of past detractors, and considering remedies provided by the law.

Keywords: trade secrets, economic analysis, intellectual property, copyright, patent, reverse engineering, independent devlopment