How Silicon Valley Has Eliminated Trade Secrets (and Why This is Efficient
Year: 1997
Type: preprint
Abstract: There is a tension or incompatibility between our stylized picture of work in Silicon Valley and the law of trade secrets and proprietary information. Professional work in Silicon Valley involves employees changing jobs frequently, either to rival firms or startups (see AnnaLee Saxenian, Regional Advantage), while the law of trade secrets conceptualizes all information about how to do jobs, that is not generally known, as the property of the employer, and awards employers injunctions and damages against departing employees who disclose or might disclose such trade secrets. It is obvious that Silicon Valley could not have developed its high velocity labor market if California courts vigorously enforced trade secrets law. Based pilot interviewing, the paper concludes that Silicon Valley employers rarely sue departing employees because local judges and juries dislike such suits, rarely awarding relief, while plaintiff firms pay for such suits in diminished internal morale and recruiting ability. While California law on the books does not materially differ from other jurisdictions', and while nearly all technical and scientific employees sign standard agreements trade secrets, invention assignment, and proprietary information, such agreements are not effectively judicially enforceable. This state is probably not inefficient according to current models of incomplete contracting. It may approximate Fritz Machlup's observation that an efficient patent system would be one in which rightsholders would overestimate the strength of their monopolies (and thus make further investments), while imitators would underestimate the same strength (so not delay imitation).
Source: SSRN Electronic Journal
Author: Alan Hyde
Institution: Rutgers, The State University of New Jersey
Language: English
Topic: Intellectual Property Law
Subfield: Law
Field: Social Sciences
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2210660216