August 15, 2023

Does X Rate a Trade Secret?

Earlier this summer, an attorney for the company once known as Twitter and now called X (more on the wisdom, or lack thereof, of this rebranding can be found here), sent a cease and desist letter to Meta (formerly known as Facebook). The letter accused Meta of engaging “in systematic, willful, and unlawful misappropriation of Twitter’s trade secrets and other intellectual property.” According to Twitter/X, Meta did this by hiring “dozens of former Twitter employees” that Meta knew “previously worked at Twitter; that these employees had and continue to have access to Twitter’s trade secrets and other highly confidential information; that these employees owe ongoing obligations to Twitter; and that many of these employees have improperly retained Twitter documents and electronic devices.” Twitter/X claimed that Meta relied on these former employees in developing Threads (a rival app to Twitter/X that Meta introduced in July).

Trade secrets can be an important source of value, but they generally get less attention than their more well-known intellectual property cousins — trademarks, copyrights, and patents.  This probably has something to do with the fact that there wasn’t a federal trade secret law until Congress enacted the Defend Trade Secrets Act in 2016 and, in order to exist (or be the subject of litigation) trade secrets have to be, well, secret. Meaning that if a company thinks someone has stolen theirs, management may be leery of litigation that could provide details about the secrets in public court filings.  

Does Elon Musk have a case against Meta? Maybe. 

While there is no one definition of a trade secret, it is described in California’s version of the 1979 Uniform Trade Secrets Act as “information, including a formula, pattern, compilation, program, device, method, technique, or process” that provides economic value to its owner and is not generally known outside of the business. In this Twitter/X vs. Meta affair, the letter to Meta fails to specify anything about the nature of the supposed trade secrets or “other intellectual property” that the former Twitter employees had access to. And while Twitter’s lawyer asserts that Meta “deliberately” assigned the former Twitter employees to work on Threads, the letter doesn’t actually identify any such employees. As a result, it seems pretty unlikely that there’s much basis for Twitter/X’s claim.  (In its response to Twitter’s letter, Meta states that no one on the Threads engineering team is a former Twitter employee.)

Twiter/X may also have a problem because, to qualify for protection, it has to have made “efforts that are reasonable under the circumstances to maintain its secrecy.” In the event of litigation, this would require it to show the time, effort, resources, and processes used to develop the secrets, as well as the value of the trade secrets and whether Twitter/X limited access to any secrets to those who need to know. This could be hard for Twitter/X if, numerous Twitter/X employees left the company with its trade secrets as the letter from Twitter/X’s lawyer indicates.  

Moreover, if there are any trade secrets, Twitter/X needs to act quickly because, in determining the existence of a trade secret, courts may consider how vigilant it was in protecting its purported trade secrets.  This means that if Twitter/X really believes its former employees are using its trade secrets to benefit Meta, it needs to quickly bring litigation (or arbitration) to enforce its rights.  However, the fact that more than a month has passed since the letter to Meta from Twitter/X’s attorney without any legal action suggests that there’s not really a basis for a trade secret claim, and this is all just bluster from the world’s richest man. 

Which no one would consider a secret at all.