Misconceptions about the TPP, Trade Secrets & Non-Compete Agreements

Occasionally, a sky-high level law will have an effect on the day-to-day workings of my legal practice. While doing some research on the Trans-Pacific Partnership (TPP), I came across this article from well respected economist Dean Baker. It appeared that some very routine advice in my legal practice might change if the TPP passed. But I don’t think so.

Baker claims that the TPP could “[t]urn Silicon Valley [i]nto Detroit” because a provision of the TPP, Article 18.78, calls for strong protections for trade secrets, including criminal penalties.

Here’s the relevant language:

2. Subject to paragraph 3, each Party shall provide for criminal procedures and penalties for one or more of the following:

(a) the unauthorised and wilful access to a trade secret held in a computer system;

(b) the unauthorised and wilful misappropriation of a trade secret, including by means of a computer system; or

(c) the fraudulent disclosure, or alternatively, the unauthorised and wilful disclosure, of a trade secret, including by means of a computer system.

Paragraph 3 lists cases where the criminal liability can be reduced and Paragraph 1 is a recital.

In what appears to be a sleight-of-hand, he cites a study that shows that part of Silicon Valley’s success is due to California’s rejection of non-compete agreements. These are not the same thing. Baker elides this difference by claiming that “that language [in the TPP] is broad.”

The problem here is that California already has trade secret laws. There are some nuances in California courts’ interpretations of the law, but it is basically the multi-state Uniform Trade Secrets Act in effect all over the country. It is found in the California Civil Code starting at section 3426. California also has criminal penalties for the misappropriation of trade secrets codified in California Penal Code section 499c. (Here’s another website claiming that this provision of the TPP would criminalize Edward Snowden’s leaks to The Guardian—as if these laws already didn’t exist.)

Baker himself notes that companies in Silicon Valley conspired to get around California’s public policy against non-compete agreements (codified in Business & Professions Code, section 16600) and paid for it harshly. But that happened under existing law banning non-compete agreements and under the regime of trade secret laws.

But where is this broad language? California would appear to already be in compliance with this provision. What is it about trade secrets that entail non-compete agreements? What did Snowden disclose that was a “trade secret?” The NSA is not a business. Their secrets don’t relate to a product. The definition isn’t even close.

Now, to be fair, legal practice in this area often substitutes the aggressive use of the trade secret statute to make it costly to hire employees from competitors, but the courts have continually made that more difficult. Non-compete agreements take someone out of the market entirely in a specified territory for a specified time, usually in a specified industry. The majority rule in states where they are enforced is that they should be limited.

But even if you don’t have a non-compete agreement, what makes it right to steal your employer’s trade secrets to compete with them? That’s unfair competition whether or not it’s under a trade agreement. California has it right already and would be in compliance with TPP.

So, I’m forced to conclude that Baker is simply trying to raise fear, uncertainty, and doubt against an agreement he doesn’t otherwise like. To be sure, it’s impossible to predict how these agreements will be applied in practice. Could I be wrong? Sure. But I can show my work; he can’t.

I haven’t decided what I think of the deal altogether and Baker’s article didn’t give me a reason to be against it and makes me suspicious of its opponents.