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Why legal experts are up in arms over the trade-secrets bill Microsoft loves

Katherine Noyes | Dec. 3, 2015
It could strike a blow against free speech and algorithmic transparency, they warn

sharon sandeen defend trade secrets act
Sharon Sandeen, a professor at Hamline University, speaks at a Senate Judiciary Committee hearing on Dec. 2, 2015. Credit: Katherine Noyes

At a Senate Judiciary Committee hearing on Wednesday, lawmakers heard arguments over a bill that has garnered passionate support from Microsoft but been compared by others to the controversial SOPA copyright act.

Known as the Defend Trade Secrets Act of 2015, the proposed legislation aims to strengthen companies' ability to defend trade secrets with federal-level protections.

Specifically, it allows companies to pursue trade-secrets cases in federal court much as they can copyright or patent cases, thereby freeing them from the state-level constraints of today's laws. More notably, it allows for so-called ex parte seizure, enabling a company that thinks a secret has been stolen to ask the government to seize a suspected thief's property without notice, to prevent misuse of that secret.

Trade secrets can encompass many things, including a recipe such as the formula for Coca-Cola, or a company's software algorithms.

"Trade secrets encompass an expanding portion of firms’ intellectual property portfolios, particularly in knowledge-centric areas of the economy such as technology and manufacturing," said Sen. Chuck Grassley, chairman of the Senate Judiciary Committee.

The theft of U.S. trade secrets is increasing, he added, with estimates amounting to more than $300 billion in losses each year.

The Defend Trade Secrets Act was introduced this summer by lawmakers including Senator Orrin Hatch, a Republican from Utah, Senator Christopher Coons, a Democrat from Delaware, and Representative Doug Collins, a Republican from Georgia, after an unsuccessful attempt to pass an earlier version last year.

At Wednesday's hearing, those arguing in favor of the bill included lawyers from Corning and DuPont, who cited the increasingly digital and global nature of trade-secrets theft.

Their view was echoed in a blog post by Jule Sigall, Microsoft's assistant general counsel of IP policy and strategy, who described the importance of trade secrets in the development of Cortana.

Opposition to the bill was voiced even before the hearing by more than 40 law professors in a joint letter that expressed concern about the ex parte seizure provision, as well as the bill's potential to increase the duration and cost of trade-secrets litigation.

At the hearing, that view was expressed by intellectual property expert and Hamline University professor Sharon Sandeen, who argued that the bill would cause more problems than it solves and could particularly harm small businesses.

Companies have long protected algorithms such as consumer credit-scoring mechanisms under trade-secret law, Sandeen said in an interview after the hearing. If passed, the new bill could give them new powers to conceal those algorithms.

 

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