Employee Rights and Employment Policy Journal

Trade Secrets and Collective Bargaining: A Solution to Resolving Tensions in the Economics of Innovaton
By
Nathan A. Newman

Abstract

This article argues for promoting collective bargaining as the solution to economic tensions within trade secret law. The core argument is that unions represent the interests of both workers who remain at a firm and those who might have a desire to depart. Because of this, collective bargaining is the most economically efficient agent for balancing incentives to create firm-specific intellectual property versus the economic advantages of dissemination of that knowledge throughout an industry in the form of departing employees' skills.

The salience of collective bargaining is based partly on understanding the historical changes in technology that have made tougher enforcement of trade secrets so important for employers. The article links the tightening of trade secret law and worker-employer struggles over information control to technological change in the workplace. It is precisely in response to changes in the industrial regime that we are seeing demands for change in the intellectual property regime, and the understanding of that technologically-driven power dynamic between workers and employers is needed to inform any new policy.

The article outlines the economic tension between incentives to innovation versus the benefits of dissemination. In contrasting the arguments for strong trade secret protection and those for free information dissemination, it highlights why both judge-made rules and individual bargaining fail to resolve these tensions in the economics of innovation. Instead, the article argues that through collective bargaining, the
interests of workers in realizing the fruit of their collective effort would be balanced with their individual interests in job mobility. Through addressing the collective interests of workers and restraining the opportunistic power of both individual employees and employers in personal contracts, the tension between incentives for production and dissemination would be best resolved.