All 50 states have trade secret protection with most states (3/4) adopting some variation of the Uniform Trade Secret Act (UTSA). The USTA allows plaintiffs to receive injunctive relief and damages for the misappropriation of trade secrets. The USTA defines a “trade secret” as:
The Restatement (Third) Unfair Competition introduced a section for trade secrets in 1995 and defined “trade secret” much the same as the USTA. In fact, comment b to the Restatement section stated that it was intended to be consistent with the UTSA. The Restatement also defines misappropriation similarly. Other ancillary issues of trade secret protection include employees and confidentiality and the licensing of trade secrets.
Implied in the right to trade secret protection is that it must convey an advantage over competitors. It is less appropriate and possibly non-existent when the product being sold is the trade secret itself. Although the UTSA does not say this explicitly, the Restatement (Third) Unfair Competition defines a trade secret as “any information that can be used in the operation of a business or other enterprise and that is sufficiently valuable and secret to afford an actual or potential economic advantage over others.” Therefore, licensing a trade secret in itself may only be enforceable to the extent that it confers competitive advantage to the licensee. This will only be true if not too many competitors know of the secret protected (e.g. not too many competitors are “licensees”) and the protected information does in fact remain secret. This secrecy is unlikely to be maintained if the trade secret is too widely distributed. Even if secrecy is maintained in fact, creating too many licensees may not be considered “efforts that are reasonable under the circumstances to maintain its secrecy.” These issues are particularly relevant in determining the enforceability of a trade secret comprising information contained in a database since the alleged trade secret is the contents of a database that are sold.
Contracts are enforceable legal obligations arising from a bargained for exchange. Generally, a binding contract is formed when one party accepts the offer of another party with both parties providing “consideration.” It is unnecessary and futile to provide a summary of contract law. It is enough to say that an “owner” of a database can contract with various parties to control the use of its database. For the contract to be enforceable, the owner of the database would have to have rights greater than the public in the form of an enforceable basis for protection (i.e. trade secret, copyright, “intangible rights”). The terms of the contract could detail the rights and obligations of the parties and would determine the outcome of any breach.
One way databases could be protected by users is by using shrink-wrap or click-on licenses. One recent decision from the 7th Circuit in 1996, ProCD v. Zeidenberg, held that shrink-wrap licenses are enforceable under ordinary contract provisions from common law and the UCC. Although ProCD did involve a license for a database listing of phonebook information contained on a CD, the issue was not the content of the the enforceability of the licensing agreement that did not appear on the outside of the box. Since the user was forced to agree to the license agreement before using the product and had time to return the product for a limited time, the user assented to the agreement by using the product and not returning it.
The court in ProCD makes another conclusion that § 301 of the Copyright Act does not preempt private contractual rights protecting works of authorship. This conclusion is based on the fact that contracts and copyright are different because contracts are only between the parties while a copyright is against all the world. It is interesting to consider whether licenses dealing with access and use of databases continue to be enforceable if based on an underlying protection and that protection is invalidated. It has been held that trade secret licenses for a fixed period of time continue in effect even though the information is no longer secret, but patent licenses usually end with the invalidation of the patent. Warner-Lambert (SDNY 1960).
Patents are mostly irrelevant to database protection. Quite simply, collections of data or information are not patentable. As explained in § 101 of the Patent Act, only “new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof” qualifies for patent protection. Although a new and useful process or method of database operation might be patentable, a database itself containing only data or information clearly does not fall within any of the prescribed categories.