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Tired: Insane Patent Verdicts; Wired: Insane Trade Secret Verdicts

from the stop-expanding-intellectual-property-law dept

There are so many issues related to what’s referred to (misleadingly, of course) as “intellectual property” that it’s difficult to cover them all. For a while I’d been meaning to write about the attempt to “raise up” trade secret law to the federal level and what kinds of problems that might cause. Professor Eric Goldman, not surprisingly, was covering this all along, noting that the Defend Trade Secrets Act from 2016 was the “biggest IP development in years” (even if Congress, in a little twist, made sure it was not officially an “intellectual property” law — which means that Section 230 immunity still applies).

Of course, it usually takes a few years for the real effects of new laws to be felt. In a fascinating, if troubling article, economist Ike Brannon, notes that we may be on the verge of a new raft of patent trolling-esque legal fights over loosely defined “trade secrets,” that have the potential to be much, much worse than patent trolling. At least with patent trolls, there’s an actual patent with actual definitions (even if they’re a mess) that can be looked at to see if there’s infringement. The world of trade secrets is a lot more murky.

Brannon points to a crazy recent case, involving a title insurance company Title Source (now Amrock) who sued a data analytics firm called HouseCanary over a claim that HouseCanary breached a contract the two companies had to deliver “an advanced, automated home valuation model.” HouseCanary countersued, claiming that Title Source used its proprietary trade secrets to develop its own home valuation model. As Brannon points out, most people thought little of these counterclaims… but a funny thing happened when it got to court:

At the time, HouseCanary?s claim appeared to be merely a tactical move with little basis in reality, but to the surprise of many a jury found in its favor in the countersuit and awarded it nearly three-quarters of a billion dollars. A judge recently upheld the jury?s award.

Several people questioned the jury?s rationale, and shortly after the verdict several former HouseCanary employees came forward to attest that what their company delivered to Amrock was of marginal value and contained no proprietary intellectual property or trade secrets that could have been stolen.

For instance, data on home sales and prices are publicly available and software that aggregates and collects it has been widely available for two decades; Redfin and Zillow each employ such software. What?s more, the alleged Amrock product at issue was never commercially sold or marketed.

The case is now being appealed, but as Brannon notes, thanks to the DTSA, suddenly there’s a wide open field of questionable trade secret claims that can be brought in federal court:

Unfortunately, it has become clear that the legislation did little to clear up these disputes. The scope of the damage awards in the the last few years and the recent spike in cases involving trade company secrets means that more companies should brace themselves for lawsuits.

It was not the intent of Congress to broaden the scope for such lawsuits when it enacted a more uniform approach to the trade secrets law. However, that does indeed appear to be occurring, and the HouseCanary verdict may very well serve as the (house)canary in the coal mine, serving to inform the market of the peril in the law.

This, of course, should not surprise anyone who’s spent literally any amount of time studying how other areas of so-called intellectual property have developed over the years. We’ve seen copyright trolling, patent trolling, and trademark trolling. There are even some examples that might be considered publicity rights trolling. So, of course, there’s going to be an increase in trade secret trolling, especially when you’re discussing an area of law that includes much more vague and amorphous “property” (note: not actual property) than copyrights or patents. And, of course, this is exactly what Professor Goldman predicted years ago, and supporters of the law brushed off.

Filed Under: dtsa, patent trolling, trade secret trolling, trade secrets, trolling
Companies: amrock, housecanary, title source