On April 21, 2020, Lex Machina released the third iteration of its annual trade secret litigation report (request the report here). Based on data from federal district court filings in Lex Machina practice areas from 2010 – 2019, the report reveals several interesting items worth highlighting.
First, trade secret cases increased by about 30% between 2015 and 2017. This is no surprise given the May 2016 passage of the Defend Trade Secrets Act – the first federal statute directed at trade secrets. But, since 2017, the increase in trade secret filings has leveled off, with roughly the same number of cases in 2017, 2018, and 2019 (around 1400 in each year). Remarkably, the number of cases in these three years is within five of each other.
Second, the report provided stats for the other common causes of actions pled in trade secret cases. When claims in other practice areas are pled, contracts is at the top, showing up in about 82% of cases. That likely does not shock any seasoned trade secret litigator, given the prevalence of nondisclosure agreements and the like in trade secret litigation. But the next two most common categories are somewhat surprising: trademark is second (in 18% of cases), with copyright third at 9%. Patents and true employment issues, areas many would think are quite coextensive with trade secrets, were fairly far down the list, with patent claims at less than 5% of cases, and true employment issues in only .4%. Given the COVID-19 pandemic and the increase of employees working from home and the trade secret issues that can raise, it will be interesting to see if there is a rise in trade secret cases with contract issues (even from the current 82% number) or employee-employer issues.
Third, continuing with the patent analogy, no single district in trade secret litigation is overly prevalent (and no single judge) – in stark contrast to patents where certain districts dominate the landscape. From 2010-2019, the Central District of California leads the pack, with slightly over 6% of new trade secret cases. The Northern District of Illinois was second, with slightly over 5%. Rolling up to the circuit level, the Ninth Circuit, the Third Circuit, and the Eleventh Circuit look to have the most cases. Given these circuits splits on other issues, it will be interesting to see if true circuit splits emerge that would attract the attention of the Supreme Court.
Fourth, the median time to summary judgment remained about the same between 2019 and the rest of the decade – about 18 months. But the median time to trial increased by about 3 months – from a little over 2 years to closer to 2.5 years. This is both surprising and not surprising. It is surprising that the time to summary judgment has not increased – trade secrets can required detailed discovery and briefing for summary judgment (for either plaintiffs or defendants). With adding the DTSA, the time required to reach summary judgment should maybe have increased. But for similar reasons, it is unsurprising that actual time to trial has increased, perhaps reflecting a recognition that trade secret trials can be long (depending on the number of trade secrets at issue) and require much pretrial work outside summary judgment (such as Daubert motions and motions in limine).
Be sure to check out the whole report for detailed data and analytics, as well as an explanation behind Lex Machina’s methodology.