California court most popular destination for trade secret cases: Lex Machina
The US District Court for the Central District of California was the court of choice for trade secret litigation filings between 2009 and the second quarter of 2018, according to a new report.
Legal analytics company Lex Machina released its “ Trade Secret Litigation Report 2018” yesterday, July 18.
According to the report, 533 of 8,754 trade secret cases were filed at the Californian court between 2009 to 2018, representing 6% of all claims.
The US District Court for the Northern District of Illinois, which saw 417 trade secret cases (5%) filed during the same time period, took second place.
Lex Machina highlighted that the most popular courts for trade secret litigation are located in highly populated areas.
However, the report indicated that cases are spread out among districts and no district court hears more than 10% of the cases, unlike in other IP practice areas, where a smaller number of districts see a higher percentage of overall litigation.
The number of trade secret filings increased by over 30% after the Defend Trade Secrets Act (DTSA) was passed by US Congress in 2016.
The act allows IP owners to secure federal relief for the misappropriation of their trade secrets, instead of having to go through individual state courts.
Before of the act was passed, trade secret filings remained steady, at around 900 cases per year. However, this figure jumped to 1,134 cases in 2017.
Littler Mendelson (201 cases), Jackson Lewis (133 cases), and Seyfarth Shaw (132 cases) represented the most plaintiffs between 2009 and 2018.
Meanwhile, Ogletree, Deakins, Nash, Smoak & Stewart (93 cases) represented the most defendants in the same period, followed by Jackson Lewis (89 cases) and Littler Mendelson (74 cases).
According to the report, a total of $1.3 billion was obtained in lost profits, while there were 103 cases where damages were awarded.
The highest sum was awarded to Korea-based nylon manufacturer Kolon Industries, which secured $920 million in 2011. However, the decision was later vacated based on evidence being excluded from the trial.
Mark Simpson, chair of Saul Ewing Arnstein & Lehr's IP practice, told WIPR trade secret protection is becoming more important in light of concerns over patentability of business methods.
"Software patenting is alive and well in the US but the lack of clear guidance from the courts on how to go about protecting it and how to draft patent claims to avoid assertions by the US Patent and Trademark Office that the claims are directed to a mere abstract idea has increased the cost, time of prosecution, and uncertainty as to how the granted patent will fare when subjected to the rigours of litigation," he said.
According to Simpson, the DTSA added a "federal arrow to the trade secret quiver" and provided additional levels of trade secret protection.
He continued that because storing digital data is easy, and people are changing jobs more frequently, it is more likely that highly sensitive information can find its way out of a company undetected.
He said: "It is just a fact of digital life that locking down important information is much more difficult today; as a result, trade secrets are becoming more and more important as a way to deter theft of business information and obtain compensation for such theft when it is not prevented."
Beatriz San Martin, partner at Fieldfisher, added that data-driven reports help the IP industry identify trends in the market. She said that these reports can inform litigation strategy, business development efforts and recruitment in specific technical areas.
"The ability to protect and enforce commercial and technical trade secrets can be of significant value to businesses by providing a competitive advantage," she said.
"As more businesses operate and trade internationally, there is a clear commercial advantage to the harmonisation of trade secrets laws. By moving towards a level playing field, it enables businesses to navigate other legal systems more easily and allows company policies to be implemented that can apply across all territories."
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