Trade Secret Precautions, Possession, and Notice

Deepa Varadarajan

Volume 68, Issue 2, 357-96

To obtain trade secret protection, a firm must take reasonable secrecy precautions (“RSP”) to guard the confidentiality of claimed information. The RSP requirement has long puzzled courts and scholars. In other areas of property and intellectual property law, such self-help is not a prerequisite for legal rights. Landowners, for example, do not have to fence their property as a condition of ownership. Requiring claimants to take secrecy precautions also seems to contradict trade secret law’s underlying rationales of promoting innovation and information sharing. Existing scholarship fails to provide a convincing justification for the requirement or explain how it advances the policy concerns animating trade secret law

This Article demonstrates that traditional property law’s “possession” doctrine can provide a useful lens for understanding the RSP requirement. In property law, affirmative acts of possession lead to ownership because they notify a relevant audience about claims to property. Drawing insights from possession doctrine, this Article argues that the primary purpose of the RSP requirement should be to notify a relevant audience (employees and other business partners) about the existence and boundaries of claimed trade secrets and thus reduce information costs for that audience. Requiring trade secret owners to provide clearer ex ante notice promotes follow-on innovation and employee mobility, concerns that are important to trade secret law. Accordingly, this Article suggests areas of reform in courts’ RSP analysis to enhance the requirement’s notice function.

Full Article