How trade secrets swallowed your right to know
October 31, 2023
Originally published at pluralistic.net
Reproduced under a Creative Commons Attribution 4.0 license
If you’ve never had a fight over the phrase “intellectual property,” count yourself lucky, you normie, you. In the land of Free Software and Free Culture, “IP” is fightin’ words.
Not unreasonably, mind you. “IP” was a deliberately ploy, undertaken by the world’s largest, most aggressive corporations, who hated the existing terms of art, like “creators’ monopolies.” You can see why: it’s hard to ask a legislature to strengthen your monopoly without provoking giggles, but “Help me defend my property”? That’s an appeal to the American state religion.
IP bundles together a mismatched basket of legal concepts: trademark, copyright, patent, trade secrets, and weird and exotic beasts like “database rights” and “broadcast rights.” Muddying these ideas is useful, because it makes it easier to bamboozle laypeople (to say nothing of making fools out of actual fucking idiots):
All this means that “IP” is a misleading, ideological concept that lacks the precision needed to have an adult conversation about policy, or justice, or business. It’s like “family values” or “cultural Marxism” – an empty signifier used by unserious people for unserious purposes.
But a couple years ago, I had a revelation: in the context of global capitalism, IP has a precise meaning. When a business person says they have – or want – IP, what they mean is “any law, rule or standard that allows me to control the conduct of my competitors, critics and customers.”
Once you start looking at IP debates through this lens, everything snaps into focus. Take “From Trade Secrecy to Seclusion,” a new paper in Georgetown Law Journal by Berkeley Law’s Sonia Katyal and Wilson Sonsini’s Tait Graves:
Trade secrets are definitely the mutant chimeras of IP. The US didn’t get its federal trade secrets law until 2016 (!), and while there’s some uniformity in state trade secret laws, there’s also some weird-ass outliers.
If you read a trade secrets law, it will probably strike you as reasonable, defining the right of firms to prevent the illegitimate disclosure of competitively significant, confidential information. And yet, as Katyal and Graves document in eye-watering, terrifying detail, trade secrets have quietly expanded and expanded until they were able to swallow accountability, public safety, and good government whole.
Again and again, judges have interpreted trade secrets laws in the broadest terms, with grave consequences for worker rights, the environment, good governance and the fundamental workings of the justice system.
The authors identify several factors that contribute to this: chief among them is that proving that a trade secrets claim is illegitimate is an expensive, arduous, fact-intensive process, which leads to “greater deference to secrecy.”
Contrast this with patent and copyright, which require disclosure before they can be claimed. And unlike patents or copyrights, trade secrets don’t need to be vetted by and registered with a government agency. Thus: “something is a trade secret because someone says so.”
This has raises some obvious issues on its own, but it gets much gnarlier when you unpick the relationship between trade secrets and the public’s right to know, through FOIA. FOIA contains an exemption for trade secrets, and that narrow exception has been widened by governments and corporations until it has all but swallowed the presumption of public access to the public’s business.
Here’s how that works: if a government or agency pays a private entity to provide a service – healthcare, say, or voting machines, or environmental cleanup – then that corporation can claim anything related to its public business as a trade secret, and thus private. This erosion of the right to know began with the passage of FOIA in 1966, but the advent of computers supercharged it, enabling vendors to claim that anything related to the software they sold the public was a trade secret.
This expansion of trade secrets has interfered with the public interest in myriad ways: “companies or government agencies use trade secrecy and confidentiality agreements to prevent investigations by journalists, employee-whistleblowers, research scientists, and private parties.”
In many disturbing cases cited by the authors, trade secrets allowed government agencies and corporations to collude to cover up evidence of wrongdoing, like when the FDA and Merck conspired to use trade secrets claims to suppress information about the tens of thousands of lethal heart-attacks caused by Merck’s FDA-approved drug Vioxx.
Trade secrets are a powerful tool for business hoping to avoid scrutiny of its shady conduct. For example, pharma and med-tech companies use trade secrets to stop state regulators from collecting information about how they price their products:
For polluters, trade secrets are a fantastic tool for ducking responsibility. For example, the EPA once answered a Sierra Club Clean Air Act request with 21,685 pages of documents – but they blacked out 18,000 of those pages.
When a business produces a new chemical, they have to file regulatory paperwork on it. Out of the past 18,000 chemicals disclosed to the US government, 95% of them were classed as trade secrets, meaning that even government scientists need clearance to study them.
Trade secret claims are on the rise across industry, from GMOs to synthetic fragrances, e-cigs, cosmetics, and flame retardants. Fracking chemicals are so secret that frackers don’t have to disclose them to doctors treating people who’ve been poisoned by chemical spills.
SCOTUS poured gas on the trade secrets fire in 2019, when it ruled in Argus Leader, a case that expanded trade secrets to include any information that is “customarily treated as private” even if there is no showing of likely harm from disclosure. As the authors write, this could give companies “an unlimited veto power over FOIA requests.”
And remember, companies do the public’s business. Forty years of hollowing out of state capacity has left local, state and federal governments reliant on private companies to handle the normal business of public administration. Thanks to Argus Leader, companies that feed at the public trough don’t have to let anyone oversee their work.
As noted, this goes double for software, and triple for “AI” software, which is used in all sorts of ways that can put people in harm’s way, from determining where to send cops to whether to grant someone bail to whether to take away someone’s kids.
Trade secrets are an easy reach for software vendors who don’t want to disclose their workings to the public. In People v. Chubbs, an accused murderer facing the death penalty was denied the right to examine TrueAllele software from Cybergenetics that was used to lock him up. That set a precedent that “source code is proprietary and therefore essentially immune from investigation by the defendant.”
Just to be on the safe side, some cops deliberately avoid “taking possession of [vendors’] source code in order to assist prosecutors and avoid turning the code over to defense counsel and its expert.”
The new hotness in using trade secrets to avoid accountability is businesses that claim their salaries and workforce demographics as trade secrets. This has become a neat way to do an end-run around rules that ban employers from insisting that workers keep their wages secret, and other rules that require disclosure of the ethnic and gender breakdown of workers.
This gambit was greenlit by the Trump Administration in 2019, in a case where employers (successfully) argued that disclosing how many workers were maimed or killed in their facilities was a trade secret.
Can we fix this? The authors think so. They argue that expansion of trade secrets is the result of specialist lawyers who argue both sides of trade secret cases, and thus are disincentivized from pushing back too hard against expansive interpretations of the law.
In the final third of the paper, they offer a selection of – wonky and legally esoteric, but fascinating – legal arguments that smart lawyers could use to push back against trade secret’s metastasis.
For example, they say that many companies lack standing to bring trade secret claims, unless they can show that they “own or license” the information in question. So when a company claims that the racial makeup of its workforce is a trade secret, a smart counter would be to demand how this could be, given that all the workers know their own racial identities.
They say this could extend to “an environmental violation or other legal wrongdoing.” The wrongdoing “cannot be bought or sold, or licensed, on any commercial market,” which could exclude it from trade secret claims.
Companies often claim that collected public facts can become a “compilation,” eligible for trade secret protection. But the authors say that this can’t be applied to workplace injury data (as the US government did in Ctr for Investigative Reporting v. US DOL). Compilations are eligible for trade secret protection when they are a “unified process.” A list of all your maimed workers is not a “unified process.”
The authors urge plaintiffs to push companies to “define what, in precise terms, [it] claims to be a trade secret on an item-by-item basis,” saying this “could go a long way in defeating such assertions.”
They also point out that both federal and state trade secret laws provide for penalties for “bad faith” invocations of trade secret, e.g. to prevent former employees from competing.
They also cite Deepa Varadarajan’s proposal for a “fair use” for trade secrets, based on 5 factors:
I. purpose of the use
II. nature of the trade secret
III. substantiality of the trade secret
IV. effect of use on the owner
V. appropriateness of a reasonable royalty
Beyond fair use, they cite David Levine’s proposal to ban “trade secret protection for FOIA exemptions as well as requiring these entities to show that they act as market competitors in the private sector.”
I think there’s one more proposal to consider, which is that government should extract binding promises from firms doing business before it – contracting to provide services, submitting for regulatory appeal – not to use trade secret to frustrate FOIA requests or other public interest purposes.