At “Erie at Eighty: Choice of Law Across the Disciplines,” I learned a lot from my colleagues on the intellectual property law panel. I also learned a lot from remedies expert Professor Michael Morley. Professor Morley argued quite vociferously that federal courts have wrongly been applying federal rules in deciding whether to grant injunctions for state law claims in diversity cases. In other words, federal courts regularly violate the Erie doctrine.
This has some fascinating implications for trade secret law. Prior to federalization, when plaintiffs could only bring state civil trade secret claims, federal courts in diversity cases naturally applied state law to decide the substance of those trade secret claims. However, when it came to determining the injunctive remedy, i.e., “equitable considerations,” it was less clear which law courts were applying. District courts would typically cite to federal case law setting out the standard factors for deciding whether to issue an injunction. Therefore, assuming Professor Morley's thesis is correct, federal courts in trade secret cases may have been violating the Erie doctrine. Yet at the same time, those district courts would often cite to state case law regarding various issues within the factors, such as whether the balance of harms or the public interest weighed in favor of issuing the injunction. This deference to state law almost certainly affected outcome, especially when employees were involved, since states like California and Pennsylvania have different ideas about when enjoining employees is appropriate.
The bigger question for trade secret law is what will happen now that we have a federal claim for trade secret misappropriation under the Defend Trade Secrets Act (DTSA). Will federal courts hearing DTSA claims, and state law claims (which are not preempted), apply federal standards when issuing injunctions? Or will they continue to cite to state case law with respect to the appropriateness of injunctive remedies? As Professors Sharon Sandeen and Christopher Seaman have observed, despite federalization, there are many reasons to believe courts will continue to defer to state law, especially when issuing injunctions. Of utmost importance, Congress has effectively told courts to use state law when issuing injunctions that affect an "employment relationship," at least with respect to federal claims under the DTSA.
The indeterminacy here really brings home one of the major themes of the conference and of the intellectual property law portion of the conference in particular. While we tend to talk about state and federal law in the IP space like they are two separate bodies of law, they are in reality often intertwined—to use Professor Sandeen’s phrase, “marbled.”
Camilla A. Hrdy, Erie, Remedies, and Trade Secrets, 10 ConLawNOW 237 (2019)