Trade Secrets: How Well Should We Be Allowed To Hide Them? The Economic Espionage Act of 1996
Rochelle C. Dreyfuss
New York University - School of Law
Fordham Intellectual Property, Media & Entertainment Law Journal, Vol. 9, No. 1, Pp. 1-44, 1998
In 1996, Congress enacted the Economic Espionage Act (EEA), 18 U.S.C. ?? 1831-39 (West 1998), which will become fully enforceable in 2001. The EEA is significant in several respects: it is the first comprehensive federal law addressing the problem of trade secrecy disclosure; it is one of the only laws providing criminal penalties for trade secrecy violations; and it is one of the few pieces of domestic intellectual property legislation that is explicitly extraterritorial in application.
After describing the EEA in detail, this article analyzes its effects on innovation. The EEA was intended to plug "leaks" in the trade secrecy system, which Congress believed to be a threat to the vitality of the creative community. This article argues that this belief is, in some ways, misguided. All intellectual property regimes allow certain free uses of information. These leaks serve important functions. They enrich the public domain and create ways for new technologies to be improved upon and applied to new fields. They reduce deadweight losses. Although trade secrecy protection also has the positive effect of creating a way for inventors to capture returns on subpatentable and unpatented inventions, civil laws strike an appropriate balance between the access interests of the public and the proprietary needs of innovators. The EEA "ups the ante" with criminal penalties. Moreover, it punishes attempts and, as so far interpreted, can be applied even in the face of legal impossibility. It chills behavior that is, in fact, legal and even desirable.
The article also notes other adverse consequences to over-enthusiastic application of the EEA: reduced mobility for workers in creative industries, differential treatment for identifiably ethnic employees, and difficulties in litigating cases based on foreign activity.
Accepted Paper Series
Date posted: August 26, 1999
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