NYLJ “Tell Me No Secrets: SDNY Considers the Scope of Trade Secret Protection for Consumer-Facing Products”
By Steve Kramarsky & Jack Millson
Move fast and break things. Innovate or die. Internet-age corporate speak tends to reserve its highest praise not just for technological innovation, but for “disruption”—the idea that there are fortunes to be made in applying new technologies to existing business models.
The other side of that coin is secrecy. In the so-called “innovation economy,” an idea’s value is closely linked to being the first to bring it to market. Uber has 20 times the market cap of Lyft, despite offering similar core services, in part from being first to market.
Unsurprisingly, then, many technology companies go to great lengths to protect the confidential information related to their businesses, often implementing elaborate technical protections, backed up by legal measures such as strict nondisclosure agreements (NDAs). Intellectual property laws, including copyright, patent, trademark and trade secret laws (in addition to traditional contract law) can provide avenues for companies to protect their IP. But it’s not always clear what assets are protectable and what are not.
Patents, copyrights and trademarks (which are governed by federal statutes) provide certain well-defined protections to limited classes of intellectual property, and the boundaries and limits of those statues—both in terms of what they protect and what protections they offer—are well defined and (relatively) well understood by practitioners and the courts.
Outside of those federal statutory regimes, however, things are far less clear. Trade secret protection, for example, arises primarily under state law, and the ability to protect intellectual property by contract is generally governed by the terms of the NDA and state contract law.
There is a Uniform Trade Secrets Act (UTSA) that has been widely adopted, but New York has not yet adopted it. There has also been an effort to codify trade secret law at the federal level under the Defend Trade Secrets Act (DTSA), which is similar to the UTSA in most respects.
Even under these laws, however, state and federal courts vary widely in their interpretations of what materials are protected and what measures are required to retain that protection, particularly when it comes to businesses that offer goods or services to the public at large. A recent case out of the U.S. District Court for the Southern District of New York provides an interesting analysis of these issues (under New York law, not the UTSA): My Mavens v. Grubhub, 2023 WL 5237519 (Aug. 14, 2023).
This article first appeared in the New York Law Journal in September 2023. Stephen M. Kramarsky is a member of Dewey Pegno & Kramarsky, focusing on complex commercial and intellectual property litigation. John Millson is an associate at the firm.
