A Proposal for Eliminating Adjudicative Loopholes Under Statutory Law of Trade Secrets in the Seventh Circuit

Today, when 70% of business value is derived from intangible assets, and trade secret misappropriation (TSM) is the most frequently litigated form of intellectual property protection, it is critical to ensure that judicial remedies for misappropriation of intellectual property remain adequate without encouraging abusive litigation. With this goal in mind, in 1979, the National Conference of Commissioners on Uniform State Laws promulgated the Uniform Trade Secrets Act (UTSA) in order to ensure a uniform and consistent treatment of trade secrets among the states. The Uniform Act displaced business torts claims that arise in common law, but only if those claims conflicted with the law of trade secrets. In its most recent decision interpreting the Illinois equivalent of the Uniform Act, Spitz v. Proven Winners, the Seventh Circuit Court of Appeals, by upholding the district court\u27s dismissal of common-law claims on summary judgment, held that the plaintiff\u27s statutory claim of trade secret misappropriation displaced the plaintiff\u27s common-law claim of unjust enrichment even in the absence of a finding that the business information at issue amounted to a trade secret. As a result of this holding, TSM plaintiffs may be left without a common-law remedy if they plead, but do not adequately prove, statutory trade secret misappropriation-notwithstanding the fact that different elements are required for common-law tort claims. This Article promotes legal certainty by answering the following questions: (1) whether it is appropriate to dismiss common-law claims on summary judgment, and (2) whether all common-law claims should be displaced by claims of trade secret misappropriation or whether some should be allowed. The viability of any principled approach to answering these questions and avoiding adjudicative loopholes hinges on the definition of the statutory term “displace.” Typically, courts do not give a second thought to defining the term “displace,” but the UTSA and state statutes are silent on how this term should be construed, suggesting an expectation of judicial discretion. This Article posits that the statutory term “displace” should be construed as “preempt” (adjudicate first) rather than “preclude” (prohibit). As a necessary consequence of this interpretation, displacement of common-law claims should require adjudication of concurrently brought claims of trade secret misappropriation. This Article will demonstrate that otherwise TSM plaintiffs may, erroneously, be left without any remedy, which is not consistent with statutory intent