73% of Trade Secret Suits Now Contain Federal Claims; 74% of Merit Judgements Result in Injunctions

Despite the increasing value of intellectual property in general, and trade secrets in particular, suits filed have remained remarkably steady over the past several years.

Over the five-year period from 2016 to 2020, reports Lex Machina in its 2021 Trade Secrets Litigation Report, two-thirds of trade secret cases (67%) were resolved by settlement or on procedural grounds (16%).

The Central District of California heard the highest number of Trade Secret cases (397 cases or 5.9% of the total case count) from 2016 to 2020.

DTAS (Defend Trade Secrets Act) claims now constitute almost three-quarters of those filed in suits. The DTSA, signed into law on May 11, 2016, provides litigants a private right of action in federal court for trade secret misappropriation claims.

“It’s no surprise that many plaintiffs favor the federal option, with nationwide service of process and harmonized rules,” says James Pooley, a leading trademark attorney, author and ex-Deputy Director General of WIPO. “Many still choose state court for essentially local cases, where it is generally easier to get your case to trial.

“As for the high percentage of judgments resulting in injunctions, that statistic should be understood in context of  how few cases actually get to a judgment after trial. Those that do would naturally tend to present strong facts that justify injunctive relief.”

Steady Volume

Given the enhanced role of trade secrets it is somewhat surprising that there are not more suits. This may have to do with Covid and the lack of job hopping and fewer new business ventures that took place in 2020-2021, or simply with the difficulty of introducing trade secret claims in a public trial.

It could have to do with the ability to settle TS disputes without resorting to litigation. An anomaly, at least, for patents. Unlike most patents and know-how, trade secrets are effectively un-licenseable.

The number of trade secret suits could be ready to change with 4 million workers resigning in April, 2021, many believing the are free to do as the please with the institutional knowledge they have collected.

Another mystery are the leading plaintiffs: Allstate Insurance Company, Total Quality Logistics LLC and Ahern Rentals Inc.

TQL connects customers with shipping needs with carriers that have the available capacity and service offerings. The company has a network of more than 90,000+ carriers to create supply chain efficiencies. It says it has industry leading technology.

It could be that some TQL carriers who are part of its network believe they can work on their own and use what they have learned working with TQL to gain a competitive advantage. One would need to take a look at the filings. TQL filed 30 trade secret suits in 2020.

Definitive Judgements

Judgements on the merits of trade secret cases in the 2016-2020 period have led to 74% permanent injunctions, 54% preliminary injunctions and 65% temporary restraining orders. Unlike with patents, many plaintiffs come away from trade secret actions with a favorable outcome.

Total damages awarded on 14 trade secret cases in 2020 was $591 million. To obtain a copy of the full trade secret report, go here.

Images source: Lex Machina

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