Spill Your (Trade) Secrets: Knowledge Networks as Innovation Drivers

Laura G. Pedraza-Farina*

Theories of intellectual property take the individual inventor or the firm as the unit of innovation. But studies in economic sociology show that in complex fields where knowledge is rapidly advancing and widely dispersed among different firms, the locus of innovation is neither an individual nor a single firm. Rather, innovative ideas originate in the informal networks of learning and collaboration that cut across firms.

Understanding innovation in this subset of industries as emerging out of networks of informal information-sharing across firms challenges traditional utilitarian theories of trade secret law—which assume trade secret protection is needed to prevent excessive private, self-help efforts to preserve secrecy. Doctrinally, knowledge network research suggests that the scope of trade secret protection in these industries should be narrow. In these industries, strong trade secret rights that grant managers tight control over employee-inventors’ informal information-sharing practices are bad innovation policy. Rather, optimizing trade secret law requires tailoring the strength of protection to match industry characteristics, narrowing trade secret scope in those industries where informal information-sharing networks are predicted to enhance innovative output. In turn, because industry types tend to cluster around geographic centers, the importance of tailoring cautions against current trends towards uniformity by federalizing trade secret law and favors state experimentalism in designing trade secret law and policy.

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© 2017 Laura G. Pedraza-Farina. Individuals and nonprofit institutions may ˜reproduce and distribute copies of this Article in any format at or below cost, for educational purposes, so long as each copy identifies the author, provides a citation to the Notre Dame Law Review, and includes this provision in the copyright notice.

*Assistant Professor, Northwestern University Pritzker School of Law. For helpful comments and feedback, I thank Charles Asay, Stephanie Bair, Jorge Contreras, Ezra Friedman, Paul Gugliuzza, Camilla Hrdy, Matthew Jennejohn, Joshua Kleinfeld, Matthew Kugler, Pierre Larouche, Jonathan Masur, Destiny Peery, Candice Player, W. Nicholson Price II, Sarath Sanga, David Schwartz, Matthew Spitzer, Stephen Yelderman, participants in the Junior Scholars in Intellectual Property Conference at Ohio State University, Northwestern Pritzker School of Law’s faculty workshop, PatCon 2017, the BYU Law and Entrepreneurship Colloquium, and Notre Dame Law School’s Symposium on Negotiating Intellectual Property’s Boundaries in an Evolving World for comments on an earlier draft. Thank you also to Moon-Hee Lee and Raja Krishnan for excellent research and editing assistance.