What\u27s It Worth to Keep a Secret?

This article is the first major study of protection and valuation of trade secrets under federal criminal law. Trade secrecy is more important than ever as an economic complement and substitute for other intellectual property protections, particularly patents. Accordingly, U.S. public policy correctly places a growing emphasis on characterizing the scope of trade secrets, creating incentives for their productive use, and imposing penalties for their theft. Yet amid this complex ecosystem of legal doctrine, economic policy, commercial strategy, and enforcement, there is little research or consensus on how to assign value to trade secrets. One reason for this gap is that intangible assets in general are notoriously difficult to value, and trade secrecy by its opaque nature is ill-suited to the market-signaling mechanisms that offer at least some traction in other forms of valuation. Another reason is that criminal trade secret law is relatively young, and the usual corrective approaches to valuation in civil trade secrecy are not synonymous with the greater distributive concerns of criminal law. To begin to fill this gap, we examine over a decade of trade secret protection and valuation under the U.S. Economic Espionage Act of 1996. From original data on EEA prosecutions, we show that trade secret valuations are lognormally distributed as predicted by Gibrat’s Law, with valuations typically low on the order of $5 million but reaching as high as$250 million. There is no notable difference among estimates from various valuation methods, but a difference between high and low estimates on one hand and the sentencing estimates on the other. These findings suggest that the EEA has not been used to its full capacity, a conclusion buttressed by recent Congressional actions to strengthen the EEA

What's it worth to keep a secret?

This article is the first major study of protection and valuation of trade secrets under federal criminal law. Trade secrecy is more important than ever as an economic complement and substitute for other intellectual property protections, particularly patents. Accordingly, U.S. public policy correctly places a growing emphasis on characterizing the scope of trade secrets, creating incentives for their productive use, and imposing penalties for their theft. Yet amid this complex ecosystem of legal doctrine, economic policy, commercial strategy, and enforcement, there is little research or consensus on how to assign value to trade secrets. One reason for this gap is that intangible assets in general are notoriously difficult to value, and trade secrecy by its opaque nature is ill-suited to the market-signaling mechanisms that offer at least some traction in other forms of valuation. Another reason is that criminal trade secret law is relatively young, and the usual corrective approaches to valuation in civil trade secrecy are not synonymous with the greater distributive concerns of criminal law. To begin to fill this gap, we examine over a decade of trade secret protection and valuation under the U.S. Economic Espionage Act of 1996. From original data on EEA prosecutions, we show that trade secret valuations are lognormally distributed as predicted by Gibrat’s Law, with valuations typically low on the order of $5 million but reaching as high as$250 million. There is no notable difference among estimates from various valuation methods, but a difference between high and low estimates on one hand and the sentencing estimates on the other. These findings suggest that the EEA has not been used to its full capacity, a conclusion buttressed by recent Congressional actions to strengthen the EEA

The Economic and Innovation Impacts of Trade Secrets

Trade Secrets are a flexible innovation tool that are used across sectors and types of firms. This report summarises and critiques the publicly available academic and grey economic literature on trade secrets and highlights key innovation aspects. Developed for the UK Intellectual Property Office as a research paper, the report finds that Trade secrets can both enable or hinder innovation. Other key points: Trade secrets are particularly important to UK firms in the R&D services, tech, and across manufacturing and non-manufacturing sectors. Larger firms rely on trade secrets more than smaller firms. Trade secrets can be highly valuable firm assets, although most trade secrets are not. Firms choose trade secrets to maintain a competitive advantage by avoiding the disclosure associated with other types of IPR. However, trade secrets are vulnerable to reverse engineering and misappropriation or theft. Cybertheft and economic espionage are increasing concerns. Trade secrets serve as a substitute or complement to patents. Most trade secrets cover non-patentable innovation such as marketing and organisational innovations. Trade secrets support innovation but also restrict knowledge flows and labour mobility. Stronger policy benefits existing trade secrets holders and encourages investment in R&D, yet reduces future innovation and creates barriers to entry. However, many questions remain and the empirical evidence base for trade secrecy is weak. This report finds that further work is needed to develop an evidence base for trade secrets, and that exploration of key themes such as the interaction of trade secrets with patentability could better inform policy

The hard sell: economics and intellectual property policy in the creative and cultural industries

35126.The hard sell: economics and intellectual property policy in the creative and cultural industriesNicola Searle1Economists have not enjoyed smooth sailing in the murky waters of intellectual property (IP) in the creative and cultural industries (CCI). As economics wades into relatively uncharted territory, and into oft-hostile seas, this chapter takes a look at how far econom-ics has come in IP policy in CCI, namely copyright, and where it might be headed. It examines economic analysis of IP as a social science, and its relationship with government and industry, with a focus on North America and the U

Changing Business Models in the Creative Industries: The cases of Televison, Computer Games and Music Executive Summary

This research examines the business model response to the change from analogue to digital in the creative industries. Looking at both traditional and emerging business models, the project focuses on three sectors: television, computer games and music. A series of six case studies, two from each sector, provide illustrative cases of the business model response to challenges to enforcement of copyright and the advent of digital technologies. This paper reports on the findings of qualitative research into business models comprising six case studies from 25 semi-structured interviews, participant observation and literature sources. The research incorporates a literature review to establish the business model methodology and analyse the current state of research. The research findings show that the creative industries are in a state of business model experimentation and that the roles of intermediaries are changing. Furthermore, the evidence suggests that the Intellectual Property (IP) framework may be secondary to other influences on business model

The Criminalization of the Theft of Trade Secrets: An Analysis of the Economic Espionage Act

This paper presents a law and economics assessment of how the elevation of the theft of trade secrets from civil malfeasance to a felony affects the incentives for both firms and potential thieves. The paper begins with theoretical analysis of the EEA and concludes with an empirical assessment of prosecutions under the EEA. In comparison to penalties used in civil cases, the new incentive of a criminal deterrent to trade secret theft introduces severe consequences, such as incarceration as a form of punishment.4 Additionally, the criminalization of trade secrets plays into the property versus liability debate. When confronted with a theft of trade secrets, a firm must decide whether to seek legal recourse and, if so, whether recourse should be criminal and/or civil. However, the financial damages assessed in EEA criminal cases can be compared to civil cases, and are found to be lower

The use of trade secrets to protect data shared between firms in agricultural and food sectors

Both public policy and business management are increasingly interested in how to manage trade secrets. One of the driving forces is the growing significance of data as an asset, as ‘oil of the 21st century'. Trade secrets are often seen as the major Intellectual Property (IP) tool for protecting data. There is also the understanding that the need to share data is increasing to allow for new types of innovation. This paper seeks to understand how data sharing practices and the use of trade secrets are evolving in the agricultural industries. Using explorative empirical data from four in-depth case studies, the paper develops a framework for data sharing practices, value sharing, and trade secrets use. We find that current data sharing practices pool around two scenarios, where data is not shared or shared only with limited partners (hence closed) and there are differences whether value created from the data is shared. We conclude that a nuanced view on the use of trade secrets in data sharing is mandated for both IP/data managers and scholars analysing the topic

Business Models, Intellectual Property and the Creative Industries: A Meta-analysis

Grounded in the business model literature, this paper examines business models in the Creative Industries (CI), and the of role intellectual property (IP) following the UK’s 2011 Hargreaves Review of Intellectual Property. It does so via a meta-analysis of 20 research projects, including 80 case studies, on business models in the CI, with a focus on television, film, computer games and publishing. This paper probes the research to identify CI business models, and the interaction of IP and business models. The paper makes three contributions to the literature: one, it brings together the literature on business models in the CI with IP policy against a backdrop of technological change, two, it applies the Baden-Fuller (2016) business model taxonomy to the CI, and three, it performs the first meta-analysis of business models. The analysis suggests business models in digital era have remained remarkably stable, and the CI have actively lobbied to support existing models

The economics of trade secrets : evidence from the Economic Espionage Act

This thesis reports on the economic analysis of trade secrets via data collected from prosecutions under the U.S. Economic Espionage Act (EEA.) Ratified in 1996, the EEA increases protection for trade secrets by criminalizing the theft of trade secrets. The empirical basis of the thesis is a unique database constructed using EEA prosecutions from 1996 to 2008. A critical and empirical analysis of these cases provides insight into the use of trade secrets. The increase in the criminal culpability of trade secret theft has important impacts on the use of trade secrets and the incentives for would-be thieves. A statistical analysis of the EEA data suggest that trade secrets are used primarily in manufacturing and construction. A cluster analysis suggests three broad categories of EEA cases based on the type of trade secret and the sector of the owner. A series of illustrative case studies demonstrates these clusters. A critical analysis of the damages valuations methods in trade secrets cases demonstrates the highly variable estimates of trade secrets. Given the criminal context of EEA cases, these valuation methods play an important role in sentencing and affect the incentives of the owners of trade secrets. The analysis of the lognormal distribution of the observed values is furthered by a statistical analysis of the EEA valuations, which suggests that the methods can result in very different estimates for the same trade secret. A regression analysis examines the determinants of trade secret intensity at the firm level. This econometric analysis suggests that trade secret intensity is negatively related to firm size. Collectively, this thesis presents an empirical analysis of trade secrets