Next-Generation Manufacturing Should Place Greater Emphasis on Trade Secret Concerns

Picking up on our discussion last week about the pending Defend Trade Secrets Act of 2014, recent testimony by Eli Lilly’s Vice President and General Patent Counsel, Douglas K. Norman in support of this legislation offers a good example of why a set of enhanced and uniformed laws for the protection of trade secrets in the United States is especially important for fostering the next generation of manufacturing in this country.

Advances in next generation manufacturing are already changing the landscape of how products are developed, manufactured, and brought to market. Fewer products will be manufactured by large-scale assembly lines of people centralized in countries with the lowest labor costs, and instead more products will be manufactured by advanced robotics, 3D printing, nanotechnology, and other next generation technologies.

Because manufacturing will be less dependent on large pools of labor, this will also mean that more products can be manufactured and processed at a greater number of locations around the world – likely either closer to the raw materials or to consumers. In other words, raw materials will not need to be transported to centralized locations for manufacturing, and then transported again to the markets. Vivek Wadhwa’s Forbes article “The End of Chinese Manufacturing and rebirth of U.S. Industry” provides a good overview of this change. Manufacturing processes will also be defined less by access to low cost labor and more by continuously improving robotics and manufacturing methods. Because manufacturing will be more dispersed, these proprietary manufacturing processes will also need to be transferred around the world to dispersed manufacturing locations. In sum then, manufacturing will likely be driven more and more by proprietary trade secrets, and these trade secrets will need to be transferred more and more frequently to diverse locations around the world. All of this will require an enhanced and more comprehensive and uniform regime for protection of trade secrets.

As Mr. Norman summarized in his testimony:

“State trade secret laws developed and made sense at a time when misappropriation was largely a local matter. It works well, for instance, when an employee of a local business steals a customer list and takes it to the business down the street. But for companies that operate across state lines and have their trade secrets threatened by competitors around the globe, the array of state laws is inefficient and inadequate for several reasons.”

Mr. Norman noted in particular that this new environment makes it difficult for companies to enact trade secret protection plans across an array of different state laws, and that because trade secret theft often crosses state lines, multijurisdictional litigation is hampered by difficulties in cross-jurisdictional discovery and service of process, and that it is also often difficult to get local courts across state lines to act quickly to preserve trade secrets.

All of these concerns are very real and will only increase with the advancing trends in next generation manufacturing. Companies currently or soon to be engaged in next generation manufacturing should take seriously their protection of trade secrets and pay close attention to efforts to update trade secret protection laws not only in the U.S. but around the world. If the federal Defend Trade Secrets Act passes, it may be an important first step in facilitating companies’ efforts to do so.