By Ashley Ellixson
On May 11, 2016, President Obama signed the federal Defend Trade Secrets Act (the Act) into law. In case you are new to the discussion of trade secrets in terms of farm data, feel free to read some of our older blog posts here. First, it’s important to know that debate exists around the ownership and privacy rights surrounding farm data collected via the many technological tools used in agriculture today. Examples of this data include soil analysis, nutrient information, hybrid seed selection, plant populations, and yield data. Trade secret is arguably one of the tools which may protect farmers’ particular farm data considering, it does not fall squarely into any intellectual property definition. Why is that?
Trade secret law is different from state to state. Even so, many states have adopted the majority of the Uniform Trade Secrets Act (UTSA) provisions. To date, 47 states, and the District of Columbia, Puerto Rico, and the U.S. Virgin Islands have enacted UTSA. New York, North Carolina, and Massachusetts continue to apply their own definitions and standards. Since the majority of states have applied the UTSA as the trade secret standard, courts in those states will look to that definition to resolve conflict surrounding farm data.
The UTSA defines a trade secret as:
Information, including a formula, pattern, compilation, program, device, method, technique, or process;
Which derives independent economic value, actual or potential, from not being generally known to or readily ascertainable through appropriate means by other persons who might obtain economic value from its disclosure or use; and
Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
When applied in a farm data context, these three aspects of the definition have more meaning. Consider this definition in the context of growing soybeans. With respect to Part 1: Is the manner and strategy in planting and harvesting soybeans a formula or pattern? We would argue yes, they are. With respect to Part 2: Does growing soybeans in this manner derive economic value? In good years, absolutely. Is the plan for growing and raising soybeans “generally not known or readily ascertainable” to other people in or outside of the industry? Possibly. This is one part of the definition where farm data does not exactly fit and the law must catch up with technology. However, when looking at whether the data are “readily ascertainable,” courts have recognized that where information is available by other means (like a phone book as opposed to a company’s customer list), the data are not protected by trade secret (USAChem, Inc. v. Goldstein, 512 F.2d 163 (2d Cir. 1975)). For example, if dairy cow genetics are available on a publicly available database, the genetic data would not be considered a trade secret, nor protected.
The third aspect of the trade secret definition deserves further consideration. With respect to Part 3: Farmers, landowners, and their advisors haven’t historically employed reasonable efforts to maintain secrecy of their data or practices. A farmer who has grown and harvested the same crops on the same property for several years and understands a particular piece of land better than others potentially has a good argument that his or her farm data are a trade secret, as long as he or she has taken reasonable steps to maintain its secrecy. When considering what reasonable steps are, courts will look to the actions of the farmer. This is done on a case-by-case basis and may be different depending on the data and farm operation.
So where does the Act fall? What the Act provides for is a federal cause of action instead of the patchwork state cause of action, previously the only option for any misappropriation lawsuits. The Act does not, however, preempt or invalidate the trade secret laws from individual states but gives the plaintiff the option of using the federal law or the state law in pursuing a lawsuit.
Additional parts of the Act may be advantageous to farmers and farm data which are not typically present in the UTSA and other state specific laws.
The definition of trade secrets under the Act is broader, or more inclusive, than the UTSA. The Act incorporates the definition used under the Economic Espionage Act which includes “all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing. ” As long as these items are kept secret, they will qualify as “trade secret” under the Act. This definition appears to incorporate farm data more easily as the definition includes “intangible” items (data) as well as techniques and processes which arguably includes planting patterns and the like.
There is a whistleblower protection provided under the Act which must be incorporated into employee contracts or non-disclosure agreements. What does this mean? Whistleblowers who disclose trade secrets to an attorney or government official are protected from retaliation and agreements must disclose this fact. Any company or farm which does not do this will be unable to recover punitive double damages (awarded to punish the defendant) or attorney’s fees in litigation.
Damages awarded under the Act will be slightly different than those at the state level and may include injunctive relief (stopping the other party from using the secret), damages, and the possibility of double damages for willful and malicious misappropriation of the trade secret. The willful and malicious standard will be decided on a case-by-case basis and depends on the unique situation of the parties. The Act authorizes damages for the actual loss of any and all unjust enrichment caused by the misappropriation. Reasonable royalty is not looked favorably upon but may be used where actual damages cannot be determined. For further discussion on damages under the UTSA for a comparison, see Dr. Terry Griffin’s analysis here.
Lastly, the Act applies to almost everyone, not just in cases where a trade relationship exists. What does that really mean? Instead of the lawsuit only arising out of a relationship between a farmer and his co-op or agriculture technology provider (ATP), the Act applies even where an employee may be talking business with someone outside of a formal relationship.
An attorney consulting with a client on a misappropriation case will carefully consider all these differences between a state law and the federal Defend Trade Secrets Act. Whether to pursue the lawsuit at the state level or the federal level will be decided by specific facts, and an experienced attorney will be able to guide the farmer as to which method is best for a particular situation. Being aware of the new legislation and the potential advantages for protection of farm data provided by the Act is important to the ongoing business of the farm.
This post is not to be considered legal advice but simply educational in nature. Please consult an attorney for your specific needs.