A foundational question in every dispute over intellectual property is whether the defendant’s product is too similar to the plaintiff’s. For almost all intellectual property regimes, an extensive body of case law and academic commentary has examined how such similarity should be measured. Trade secrecy, however, remains a remarkable exception. In trade secrecy cases, just as in other intellectual property cases, the defendant’s good or method can diverge markedly from what the plaintiff developed. Yet it turns out that trade secret case law provides little guidance for assessing how much similarity is too much. The standard remains, fittingly but frustratingly, a secret.
This Article takes the first close look at what that standard should be. We argue that trade secrecy’s similarity framework is currently asking an incomplete set of questions. It inquires almost exclusively into the defendant’s innovation steps, instructing factfinders to determine whether the defendant had acquired any advantage from familiarity with the secret. In doing so, it wrongly skips over an inquiry into the end product or process that the defendant is actually exploiting. A better test would consider not only the defendant’s benefit from knowing the secret, but also the kind of exploitable asset that the benefit ultimately translates into. Under our proposal, claims for misappropriation through either improper acquisition or disclosure would remain largely the same. But misappropriation through use would change. A defendant wouldn’t be liable for using a lawfully acquired secret unless it is exploiting an asset that incorporates material elements from the owner’s secret in a manner that the plaintiff actually foresaw or, given industry trends, could reasonably have foreseen.