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Trade secrets and antitrust law

Harry First, in Rochelle C. Dreyfuss, Katherine J. Strandburg, eds., Edward Elgar Publishing, 2011; NYU Law and Economics Research Paper No. 11-06

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The antitrust treatment of trade secrets has remained largely hidden, with trade secrets today being viewed as simply the equivalent of other forms of intellectual property. Closer examination reveals, however, that although the antitrust treatment of trade secrets fits generally into the debate over the proper antitrust treatment of intellectual property rights, the arguments for according deference to the protection of confidential trade secret information are somewhat different from, and far weaker than, the arguments for according such deference to either patents or copyrights. This article begins by exploring the two fundamental issues for antitrust analysis of trade secrets: What is a trade secret and what consequence should flow from a firm’s decision to choose the trade secret regime when it wants to protect information. The second section maps the state of the law dealing with antitrust and trade secrets, discussing the early history (which predates the Sherman Act) and then describing how the courts have come to deal with licensing issues under Section 1 of the Sherman Act and with exclusionary conduct under Section 2. The final section sets out and applies a more general framework for antitrust analysis of trade secrets, proposing three guiding principles: 1) Trade secrets should receive no deference or presumptions when raised as a defense to anti-competitive conduct. 2) Antitrust courts, when assessing the economic consequences of trade secret protection, should be mindful of the legal properties of trade secrets. 3) Antitrust courts should respect - but not expand - the bargain that holders of trade secret protection are provided as an incentive to invest in the production of information.

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