Tony Sammi: Hi, welcome to the Latham Tech Podcast, where we survey the latest trends emerging from the world of tech and explore their impacts on your company, both the opportunities and the risks. I'm Tony Sammi, Global Vice Chair of Latham's Technology Industry Group, and joining me today is my colleague Rachel Blitzer, who represents clients in high-stakes trade secret, patent, and antitrust cases. Welcome, Rachel. Thanks for having me.
In this episode, we'll be talking about how high-tech companies can navigate an increasingly complex trade secrets litigation landscape. Rachel, trade secrets have now increasingly become the battleground in US courts when it comes to AI, chips, pharmaceuticals, life sciences. What's driving that trend?
Rachel Blitzer: When we look at today's global economy, a large percentage of company value is tied up in its intangible technology assets. Some of those assets are protectable through other types of IP protections, like patents and copyrights. But I would say the vast majority of them are best protected. and maybe only protected, by trade secret. To that end, we're seeing company value — and protection of company value and increase of company value — play out in trade secret lawsuits. On top of that, there are opportunities for huge damages verdicts. and people have taken notice of that.
Tony Sammi: And we've seen a few of those, right?
Rachel Blitzer: Yeah, we've seen them in the hundreds of millions and up into multi-billion dollars. Now, some of those huge verdicts that we're talking about have, on appeal or post-trial motions, been reduced. And a lot of those fights are continuing to play out years later. But the fact remains, there is a huge opportunity in trade secret litigation for really large verdicts. But, Tony, these disputes are not just happening in the US. We're seeing lots of cross-border disputes, given the amount of employee mobility there is from country to country. These days, I'm sure you've been seeing that in your practice.
Tony Sammi: I have, and that's a great question. The corollary to US litigation is how do trade secrets work extra-territorially around the world? Why is it a good mechanism to protect your company's intellectual property? Let's answer that question by comparing it to patents traditionally. When you get a patent, what's the quid pro quo? What's the deal you strike a deal — in whatever jurisdiction you get the patent. Number one, you tell the world what your invention is, so the cat's out of the bag. Then if you want to enforce it, you have to rely upon the courts where that patent was issued: the enforcement mechanisms in the country you're in.
That can often be a bit of a gamble, right. If you're in a country doing business, a country that has a robust court system, you may be able to rely upon that enforcement mechanism. But suppose you're doing business in countries that don't have as robust a court system to enforce your patents. It's a bit of a quandary because you've already told the world what your invention is.
Now let's compare that to trade secrets. If you are a company operating cross-border, you might use trade secrets in the following way. You say, “I'm not going to tell the world what my secret sauce is. I'm not going to get a patent for it. I'm going to be able to protect my information by keeping it secret without an expiration date. And to the extent that I need to enforce it, I will, but I'll hope not to get to that point because I won't reveal it in the first place.” You may not even need to use the court system in that country.
Rachel Blitzer: We're even seeing those issues play out in cases today.
Tony Sammi: We are. Let me ask you this, trade secrets can be the recipe for a company's secret sauce, which is of a lot of value, obviously. But they can also be a blind spot. What are the risks, pitfalls, or blind spots that startups face when they think of trade secrets? Or they don't think of trade secrets?
Rachel Blitzer: One of the real pitfalls that we see for startup companies these days is simply not recognizing what it is that they have. Startup companies are moving fast, and they're often doing it with a very lean team. While they have so many issues to juggle, sometimes IP, or thinking about IP, goes on the back burner. Or even when they're thinking about IP, sometimes they're thinking about the types of IP that require formal registrations, like patents or trademarks.
But they're developing trade secrets all the time, especially in high-tech industries. They're constantly developing trade secrets as they develop cutting-edge technology. But a mistake that they make is not recognizing what they have and doing what they need to do to keep those trade secrets a trade secret.
Under the law, a trade secret is only a trade secret if it's protected by reasonable measures. One thing that startup companies sometimes forget to do is pause to think, “How do we actually protect all of this wonderful information that we're generating to make sure that what is a trade secret stays a trade secret?”
Another pitfall for a startup can be not taking the time to document what they're doing. Like I said, startups are moving fast, and we want them moving fast. That's how they're achieving such great success. But if they haven't documented how it is that they got from point A to point B, in a later litigation, they might have trouble proving that this technology that they're using is actually their own. So it would behoove startup companies to retain some documentation of how it is that they develop their technology.
Tony Sammi: I think those are great points. I think in common parlance, whenever someone thinks about IP, they just start thinking about patents to the exclusion of trade secrets. On your second point, what about when startups are trying to get their technology out there for investment? How does that impact their ability to protect their trade secrets?
Rachel Blitzer: One of the things that we're trying to balance in this whole equation is balancing business interests with legal interests. You and I are thinking from the legal perspective, but these decisions need to marry both the business concerns with the legal concerns.
In the investment scenario, one of the things that startups really need to do is get their information out there in a way that is appropriate for the investment and limited. Obviously, an important tool in this process is NDAs.
Tony Sammi: I've seen instances and I think you have as well, both of us have, where startups are so eager for investment dollars that they might write a white paper and disclose some really secret information that they then later can't capture anymore as a trade secret.
Rachel Blitzer: Absolutely. And in some of the industries in which we work, especially in for example software, it's even part of the culture to share what you know. But that becomes a problem when you later want to characterize something as a trade secret. So these decisions need to be carefully balanced. A white paper might be really helpful in getting investment and a big problem in a trade secret litigation. It behooves startups to take a moment to pause and think which of these priorities is more important to me? It may be that the white paper is the path to success for this startup, and it's worth taking that risk and worth maybe sacrificing a trade secret, but those decisions need to be made intentionally.
Tony Sammi: Your point about NDAs is a really good one, too. How important are those NDAs for those startups?
Rachel Blitzer: They are so important. One of the things that we see way too much is incredibly sophisticated startup companies — who are developing cutting-edge technology — using form NDAs they grabbed off the internet or that some collaborator suggested to them. One of the best tools for a startup is a bespoke NDA, something that is tailored to the type of trade secrets they have, the type of confidentiality that's needed, and the types of protections that are needed for their specific information.
Tony Sammi: I would add that, in my view, a little work ahead of time on those NDAs can pay big dividends later on.
Rachel Blitzer: This doesn't need to be a huge investment of time or money. It is hard in a fast-paced environment, but it just requires that moment of stopping and assessing where we are and taking some steps towards protection that needs to be tailored not to slow down your business.
We've talked already about both patents and trade secrets because they both come up a lot in the technology space. How can a startup or any other company really think through its choices of which of its IP deserves patent protection and which should be protected by trade secret?
Tony Sammi: Without giving a sort of a dissertation on the law, let's just talk at a high level. What's really the fundamental difference between patents and trade secrets? Patents are in the US Constitution. They're a monopoly that you get as a patent holder to exclude others from doing something, and that something is your invention. You've got to meet a lot of requirements before you get a patent. You have to apply for a patent from the US government, and the government has to review your application. You have to prove that your invention is novel, not obvious, and a whole host of things. Then you may be issued a patent.
That's great. But that patent has an expiration date roughly 20 years as of today. But the quid pro quo again, the important part about patents, is you need to tell the world what your invention is. So it's out of the bag.
Now let's contrast that with trade secrets. There is no governing body that you apply for a trade secret from. You don't submit an application to the US government. You have a trade secret if you've got information that you keep secret with reasonable measures, that gives you an advantage in trade. It has value by virtue of the fact that your competitors don't know it.
Now what can that be? Almost anything as long as you meet those requirements internally that you protect it, and it gives you an advantage because it has value. Trade secrets, for example, can cover things like a business development environment or negative trade secrets. Let's say you're a startup, and you're thinking of a way to solve a problem. You go down three blind alleys where you spend a lot of money and resources. Then you find out that those three alleys are dead ends. That's valuable information to your competitors. That's a negative trade secret. So long as you keep that secret, someone can't steal that from you, and you can have a trade secret.
Trade secrets in sum protect a broader range of information than patents, don't have an expiration date and can continue indefinitely, and are much more flexible and more plaintiff-friendly when you have to enforce.
Rachel Blitzer: Let's say you pick up the phone, and a client is asking you, “We've just developed some incredible technology; what should we do with this? Should we get a patent, or should we keep it a secret?”
Tony Sammi: I would say things like “what is it that you're doing that is different than everyone else?” Clients often make the mistake of thinking what they're doing might not rise to the level of a trade secret. That's a classic mistake. I ask clients this way: “Would you let a competitor come into your premises or log onto your computer systems and just take a look at what you're doing?” The answer is always no. If you won't let a competitor come in and log into your systems or come to your offices and just walk around without any oversight, that means you've got secrets. That means you've got secrets that are valuable. That means you've got a way of doing something that is protectable and that you don't want your competitors to have.
So let's start by taking stock with our clients. Tell me what it is that you do that separates you from your competitors and that they don't know about, and we'll catalog it. If we come across things that are patent eligible, we can do that as well. If we come across things like source code, which can be trade secrets and also be eligible for copyright protection, we can do.
Rachel Blitzer: Let's let's say you and your client have decided that a certain innovation is within the trade secret protection world. What questions are you asking to the client to help them figure out what the best strategy is for that client to protect their trade secrets?
Tony Sammi: We'll first take a look internally as to how they treat that trade secret, that information. Do they have sufficient protections? Do they allow only the people who need to have access to it, to have access to it — not the cleaning staff, but the engineers only. Are there protections in how they log on and in their security measures. When they're working with vendors or partners, are they making them sign NDAs before they divulge what these trade secrets could be? All that's going to matter when it comes time to enforce your trade secrets. So we've got to sort of build a plan with a client.
I think it's low-hanging fruit. I mean, it sounds complicated. But at the end of the day, it's a little work on the front end that can reap vast rewards on the back end.
We've talked a lot about sort of how to protect a company's own trade secrets, how do companies, particularly startups, protect themselves from litigation involving trade secrets?
Rachel Blitzer: It's a great question to be thinking about. One of the things that we're really looking to do here is minimize litigation exposure because it can be nearly impossible to avoid litigation entirely. But one of the things that startups and other companies can think about as they're working with their IP is developing formal procedures to protect it. Oftentimes, startups don't necessarily see the threat coming from other companies as they're developing, but activity that happened years ago can all of a sudden rear its head — especially when a company sees some success, gets acquired, has a hit product, has an IPO.
Tony Sammi: We've seen that scenario a lot.
Rachel Blitzer: It plays out over and over again. And when that happens, we're typically looking at conduct two, three, five years back that is actually what's being alleged in these cases. What the companies had done earlier, before they ever recognized these threats, comes into play.
So what are the things that companies can do in the process of developing and sharing their IP to protect themselves and to think about the IP from others that might be coming in the door?
Tony Sammi: One of those scenarios that we face all the time is that people aren't hatched. They had previous jobs. Their previous experience. They come from other companies.
Rachel Blitzer: Absolutely. A lot of these cases come up in instances of employee movement where somebody moved from one company to another and maybe they took trade secrets and maybe they didn't. But either way, we're in a litigation, and we're going to figure it out. Some of the things that companies can do to protect themselves are NDAs, but there are a lot of other formal procedures that companies have that come to bear on this. Think about their internal policies, their IP training, and in particular their onboarding and offboarding.
Onboarding and offboarding need to be taken so seriously. When we're really talking about the risks to a company of being sued by somebody else, we're thinking in particular about onboarding. What is the procedure that you're taking to make sure that when you have a new hire that they're not bringing in any information from their prior company? Are you doing forensic checks? Are you talking clearly with them? Are you giving them written policies to look at? Are you having them sign a document saying “I did not bring anything into this company” and signing their name at the bottom of that document?
Also, think about your culture. Are you making it clear to new hires that this is not tolerated here, that we do not use or need other companies’ information. Or do you use these formal procedures, but then there's a wink and a nod and an indication “that might be okay here?” Companies need to make it really clear to their employees, both through formal channels and through their culture, that the use of IP from other companies is not appropriate.
Tony Sammi: And let me add, it's a two- sided coin. On the one hand, we say to our clients, “You may not realize what is protectable by trade secrets, so you should look into it so you can maximize the value of your company.” The other side of that coin is you might not realize as an employee who's departed somewhere else what that previous employer might claim as their trade secret. You might think, “Oh, everybody knows that or that's common knowledge,” when in fact, it's not.
Rachel Blitzer: It's also unfair to expect your new hires to know the answers to these sophisticated legal questions. That's why you need to work with your in-house counsel and your outside counsel to develop strategies to get good onboarding procedures in place so that you can take the right steps to really make sure nothing is coming in the door — whether on purpose or innocently.
Tony Sammi: I couldn't agree more. I think that in our space, one thing we've come to realize is that there are some very brilliant and talented people who are doing amazing things, but they may have very skewed ideas of what IP really is. Particularly, source code. They may have very incorrect assumptions as to what qualifies as protectable.
Rachel Blitzer: Some people think my work is my work and don't remember the employee agreements that they signed a decade ago that assign that work to their employer.
Tony Sammi: Rachel, how do you see trade secrets and trade secrets litigation evolving going forward in the US and abroad?
Rachel Blitzer: We talked earlier a bit about cross-border issues. I think one area where we're going to see a lot of litigation is in testing the limits of our federal trade secret statute and its reach. Our federal statute, the DTSA, allows for trade secret cases involving overseas activity, assuming that at least some act in furtherance of the misappropriation at issue happened in the US. We're going to see a lot of litigation about how far that reach goes, what actual acts need to happen in the US to trigger that to allow US law to be used, and how far the damages can reach. Expect a lot of litigation there.
We're also expecting to see litigation regarding the time in a litigation at which trade secrets need to be disclosed.
Tony Sammi: A real hot-button issue.
Rachel Blitzer: We see a circuit split here right now with some circuits requiring identification of trade secrets right at the outset, at the pleading stage; some in early discovery; and others in the course of discovery. We also expect to see those decisions have a big impact on forum selection by plaintiffs and whether they're trying to apply federal law or state law, because there are differences there as well.
Last, I don't think we can do a podcast in 2026 and not talk about AI. We're probably going to see a lot of AI-related trade secret litigation coming up. There has not been much so far, but we expect to see plenty of it. One of the issues that you and I are seeing is the use of trade secrets to populate large language models: where companies are feeding their own trade secrets into LLMs. There's going to be big questions about whether those trade secrets remain trade secrets and how they're used. If somebody is able to prompt the LLM to give them the trade secret, was that an act of misappropriation, or is it the case that that trade secret really isn't a trade secret, because if you could prompt the LLM to give it to you, then reasonable measures were not taken to protect it. This is an area that has not been explored in litigation much yet, but expect to see more of it in the years ahead.
Tony Sammi: Let's talk about, not just the large language model itself, but the physical infrastructure that underlies AI. On the chip level, on the software level. There are lots of trade secrets around there. What we're really seeing the beginnings of are trade secret litigations between companies on the algorithmic use of AI prompts and how to maximize the efficiency of using prompts in AI. That, in and of itself, can be a protectable trade secret, so there's a lot that's going to happen on that front as well.
I'll just add that I think we're going to continue to see an uptick in trade secret litigation across the United States, given the flexibility of damages awards that remain in trade secrets, given the broad range of material that trade secrets can cover, and given the advances in technology. I don't think it's going to let up anytime soon.
Rachel Blitzer: There are lots of opportunities for plaintiffs here, and we expect to see plaintiffs continue to use the legal system to explore that.
Tony Sammi: I think that's a great place for us to wrap up our discussions for today on trade secrets. Thanks, Rachel.
Rachel Blitzer: Absolutely, great chatting with you.
Tony Sammi: Thank you, and thank you for tuning in to this episode of the Latham Tech Podcast. We hope you'll join us again next time.