The Trade Secret-Contract Interface
103 Iowa L. Rev.1543 (2018, Forthcoming)
50 Pages Posted: 22 May 2018 Last revised: 27 Nov 2018
Date Written: May 7, 2018
Contracts play a dual—and dueling—role in trade secret law. On the one hand, non-disclosure contracts serve an important evidentiary role, helping owners prove key elements of a trade secret claim (e.g., reasonable secrecy efforts). Because of this evidentiary role, trade secret owners routinely use confidentiality contracts when sharing information with employees, business collaborators, and consumers. This Article suggests that contracts have a pivotal evidentiary role in trade secret cases because of their notice function. Unlike patent law, trade secret law does not impose formal application or disclosure requirements on putative owners. Thus, non-disclosure contracts are one of the few ways to notify recipients of information about the existence and scope of claimed trade secrets.
Contracts’ centrality to trade secret law can create doctrinal tension, however, when owners draft provisions to evade trade secret law’s requirements and limitations. For example, trade secret owners impose contract provisions that prohibit reverse engineering, avoid ongoing secrecy precautions, prevent the use of non-secret or publicly available information, and incorporate employee non-compete clauses. Such provisions conflict with trade secret law, but owners can nonetheless enforce them through breach of contract claims. The pervasive use of contract law to evade trade secret limitations can undermine important policy concerns, such as promoting cumulative innovation and protecting employee mobility. This Article offers the first comprehensive account of trade secret law’s uniquely co-dependent yet complicated relationship with contract law. I consider various legal mechanisms to strengthen the ex ante notice function of contracts and deter uses of contract that pose particular risks to trade secret law’s underlying policy concerns.
Keywords: trade secret law, intellectual property law
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