Legal Origin and Emulation of Trade Secret Protections: A Cross-National Empirical Study

Why do countries enact stronger legal protections for trade secrets? Existing research on other types of intellectual property (IP) rights suggests at least three potential mechanisms. First, more powerful countries, such as the United States, coerce other countries into implementing stronger IP rights by threatening to enact trade sanctions against them. Second, countries agree through international legal instruments to strengthen their IP protections in exchange for benefits in other issue areas, especially trade. Third, countries that are open to capital flows increase their IP rights through regulatory competition with other countries to attract or retain multinational investment. This Article provides empirical evidence for an alternative mechanism, using data on the trade secret protection levels of seventeen Organisation for Economic Co-operation and Development (OECD) countries and twenty OECD trading-partner countries during the period of 1985 to 2010. This Article demonstrates that countries with civil-law legal systems were statistically more likely to implement increases in trade secret protections over time, all else being equal. Consequently, the findings in this Article provide support for emulation as a causal mechanism for increased trade secret protections. This Article argues that civil-law countries saw a lack of domestic-led innovation as an impediment to economic growth and sought to spur innovation by reducing legal uncertainty in the trade secret realm. In doing so, they emulated the relatively stronger trade secret protections of common-law countries. This Article provides a novel contribution to the literature on the diffusion of IP laws and holds significant implications for U.S. IP policy abroad. In particular, U.S. policymakers’ efforts at shifting collectively held ideas about trade secrets through exchanges with foreign officials, like those that occur through the U.S. Patent and Trademark Office’s IP attaché programs in foreign countries, offer substantial promise for raising other countries’ trade secret protections to emulate those of common-law countries like the United States.