A Trade Secret Compensation Compass for MLB and Other Industries

A criminal fine won’t bring your trade secret back or compensate you for your loss.

A jail sentence won’t bring your trade secret back or compensate you for your loss.

So, should the Houston Astros be satisfied with the St. Louis Cardinals’ former scouting director, Chris Correa, pleading guilty to unauthorized access to computer information and potentially being fined, sentenced to prison or both? (“Ex-Cardinals Official Pleads Guilty to Hack,” January 9-10, 2016 Wall Street Journal, A2.) Probably not.

Baseball teams’ collection, analysis and use of data have been and are cutting edge. Platforms, data inputs, algorithms and resulting outputs – all competitively valuable information (CVI) and all potential trade secrets – fuel, for example, the all-important roster building process, which includes drafts, trades and free agent signings.

Here, Mr. Correa wrongfully accessed one or more of the Astros’ CVI assets. For purposes of this discussion, I assume that Mr. Correa’s wrongful access went beyond merely glancing at the CVI assets and included wrongful acquisition, e.g., downloading or copying, of one or more of those assets. Perhaps Mr. Correa then wrongfully disclosed or used one or more of those assets within the Cardinals’ organization or otherwise.

Importantly, trade secret misappropriation comes in three flavors: unauthorized acquisition, disclosure or use. I emphasize the “or.” Far too often, litigants mistakenly assert and courts mistakenly conclude that a wrongdoer must use a stolen trade secret in order to be liable. That is simply not true.

Unauthorized acquisition, by itself, can be the basis for establishing trade secret misappropriation. Unauthorized acquisition is a serious offense because the trade secret owner has lost control, to some extent and for some period of time, over one or more of its assets. Moreover, regaining complete or even sufficient control over the assets can be a dubious proposition; would you reasonably believe that the thief (necessarily, a dishonest person) has told you everything that he did with, has identified every place he stored and has identified everyone to whom he disclosed the assets? (While injunctive relief can be obtained in civil trade secret litigation, the focus of this article is compensation for past wrongdoing, not controlling future conduct.)

Back to the diamond.

Neither the Astros, nor any other MLB franchise, reasonably should be satisfied with fines and jail sentences for the theft and loss of CVI. Instead, if you’re a baseball owner, you should want Major League Baseball (MLB) to award meaningful compensation for a CVI-related offense. Otherwise, what is the point of developing and leveraging CVI?

Meaningful compensation is compensation that corresponds to what was stolen and what was done. As to the latter, wrongful disclosure and use can and should increase any compensation awarded.

So, should money be the primary form of compensation where one MLB franchise steals the roster-building CVI of another MLB franchise? (For purposes of this discussion, I assume the Cardinals’ culpability; whether the Cardinals are or ultimately will be responsible for Mr. Correa’s or anyone else’s acts is unknown at this point.)

Here, the character and magnitude of the stolen assets — remember, these are roster-building assets –seemingly demand a transfer of a draft pick or picks from the Cardinals to the Astros. Draft picks are incredibly valuable currency in MLB (and in most professional sports) and they seemingly directly correspond to the character and magnitude of the stolen assets.

What about financial compensation? Perhaps that also should be part of the compensation from the Cardinals to the Astros. In a CVI or trade secret incident that does not involve professional sports franchises, financial compensation should almost always be in play, no pun intended. Typically, the only real questions are the type and amount of that financial compensation.

In sum, where CVI, such as a trade secret, is stolen, legal principles and common sense should be the compensation compass. In other words, the appropriate compensation should depend on what was stolen, what was done and the currency or currencies used in the affected market.