Timothy Kolman, Kolman Ely

You go to a restaurant and order apple pie. It's the best apple pie you've ever eaten. You want the recipe. You can either ask for it or reverse engineer it. So far so good. But what if you wanted to make an apple pie that was even better? Knowing the recipe will only take you so far. What would really help is knowing what didn't work. You won't have to experiment in the kitchen wasting time and resources. You now have a head start. Welcome to the value of negative trade secrets, the critical knowledge of what doesn't work.

What if the apple pie you were enjoying was from your own restaurant, but your cook, taking with her all her knowledge of what doesn't work, is hired by your competitor? If she uses your recipe and nothing more, she has taken your trade secret and you could sue her. But if she uses those negative trade secrets of what doesn't work to make a better apple pie, what are you to do? Now she's created a different recipe. How are you to prove that her new, better recipe is in fact your bastard offspring?

What if your employee is the top, Nobel prize winning, research scientist at a biotech company and knows all the failed experiments conducted within research and development and all the abandoned technical solutions? Those negative trade secrets might be worth billions to a competitor. If purloined, the competitor takes a quantum leap forward, never having to expend the time, money or effort to be on an equal competitive footing. Now what if this research scientist leaves for employment with a competitor?

This issue arose, for the first and only time, in the case of Waymo v. Uber, 2018 U.S. Dist. LEXIS 16020. Waymo accused Uber of hiring away its engineer who had innovative expertise in Lidar (light detection and ranging), a critical technology for driverless vehicles. Waymo, according to its CEO “had to find 2,000 ways to not build a Lidar before finding this one way that worked really well.” However, how were these 2,000 negative trade secrets to be protected?

U.S. District Judge William Alsup of the Northern District of California, who presided over the trial (which settled prior to verdict) opined that no protection could be afforded. “Is an engineer supposed to get a frontal lobotomy before they go on to the next job? The answer's got to be no. But say they know the recipe for Coca-Cola. They have to forget that before the next job.”

Alsup understood that in protecting lessons learned from mistakes, errors and bad ideas, intellectual property law can only go so far. Although these negative trade secrets are legally protected by the broad definitions in the Defend Trade Secrets Act of 2016 (DTSA), perhaps a more effective cause of action, since the engineer's knowledge could not be truncated, might have been unfair competition.

In the biotech field, where advances are made through hypotheses and failed experiments, it might be possible to show, within a reasonable degree of scientific certainty, that an innovation could never have been made but for the theft of a competitor's negative trade secrets. The negative trade secrets become the sine qua non of the theft because, without their purloining, the competitor would never have had the scientific framework to create, and perhaps patent, its new invention.

Negative trade secrets, even if the law cannot protect them directly, are the hidden anti-matter of enforcement, circumstantially proving that a misappropriation has occurred.

As easy as apple pie.

Timothy M. Kolman, of Kolman Ely, focuses his practice on labor and employment law. The firm has offices in Philadelphia, Pittsburgh, Scranton and Lancaster.