Farmers Must Actively Protect Data to Secure Trade Secret Protections

By: Ashley Ellixson and Dr. Terry Griffin

In our recent publication on Ownership and Protections of Farm Data, we suggested that trade secret would be the best candidate among intellectual property laws to protect farm data. In follow-up discussions, we realized we needed to revisit a key point of our publication which may have been ignored. That point is: to be protected by trade secret, a farmer must actively protect their farm’s data. Although we do not know for certain what steps the courts will require, we know that unless the farmer takes active steps to protect the data,  the courts will not treat the data as a trade secret.

To be successful on a misappropriation claim, or an instance where a farmer’s data has been used in a way not explicitly allowed or given permission for, the farmer must first prove the information at issue is actually a trade secret.  Next, the farmer must prove the data was misappropriated, or wrongly acquired by another party.  The court will look at whether there were reasonable measures in place to ensure the secrecy of the data in order for the farmer to prevail in a trade secret lawsuit. 

What are these reasonable measures? Well, we do not know exactly since we do not know whether a court would consider farm data a trade secret. But what we do know can be based on what courts do with other forms of information determined trade secrets.  And what we know for sure is courts look for active measures taken to ensure privacy.

The following is not an exhaustive list; these are simply potential steps in helping to protect farm data as a trade secret:

Potential “Reasonable Measures” to Protect Farm Data

1. Have all employees sign a nondisclosure agreement regarding data/secrets.  You must define what is and is not trade secret in the context of your operation.
2. Ensure new employees, by signing  a nondisclosure agreement, do not use or bring former employers’ data/information while working for you.
3. When creating backup copies of data, make sure no other entities have access to these backups.
4. Control employee access to information.
5. Instill password protections for electronic servers and files.
6. Regulate visitor and employee access if possible in areas where sensitive data may be accessible.
7. Conduct ongoing employee training on the measures used to protect the farm data, when convenient for your operation.
8. Require a majority vote by farm operators before data are shared with a third party.

An additional issue arises when employees leave the farm operation or are otherwise no longer employed by the farm. The farmer may be able to ensure any access the employee had to farm data is stopped, which may mean changing passwords, access points, etc.  At the employee’s departure, consider going over the signed nondisclosure agreement and ensure the employee knows that the obligations remain in effect. 

It is important to discuss these points and considerations with an attorney to make sure the measures work for your operation and are tailored to your unique situations. This post is not intended to be legal advice but informational in nature to help ensure farm data protection in the context of trade secret. In order for farm data to be safeguarded by trade secret, it is imperative that the farmer takes reasonable measures in protecting farm data.  Simply doing nothing will not help the farmer in a misappropriation lawsuit in court.

Ashley Ellixson, J.D., LL.M. 

Guest Contributor

@Legally_Ashley

E-mail

Terry Griffin, Ph.D.

@SpacePlowboy

E-mail

Regulating the Regulatory Process

by Levi Russell

I suppose this is Mercatus Center week, but I can't resist sharing some great analysis and commentary from their researchers.

Senior Research Fellow Patrick McLaughlin recently testified before Congress on the need for an established process of regulatory form at the federal level. Drawing on the experience of the UK and Canada, McLaughlin presents several methods of establishing "regulatory budgeting." He describes this method of regulatory error correction this way:

Regulatory budgets, like other types of budgets, only work if they force the spender to identify and prioritize the most valuable options. The behavior of an agency with a budget differs from that of an agency without a budget. In today’s no-budget world, an agency’s objective is to fulfill its mission with the promulgation of rules. The effectiveness and efficiency of those rules are not evaluated in hindsight, and prospective evaluation of effectiveness and efficiency only occurs for less than one percent of all new rules. In contrast, an agency with a regulatory budget would act differently. First, the agency would avoid new regulations that would not achieve high benefits relative to their budgetary cost. Second, the agency would have incentive to eliminate old regulations that are found to be ineffective or intolerably inefficient. In other words, a regulatory budget process would resemble an error-correction process: it would lead to fewer new errors as well as aid in the identification and correction of existing ones.

 McLaughlin goes on to explain methods of setting the regulatory budget limit and several measures of regulation that could be used in this approach. I highly recommend reading the whole testimony.

Here's the conclusion:

Regulators and legislators alike are not perfect. Regulations are perhaps unique in the sense that they are undeniably important to all actions in the economy, but are not subject to a process for error correction. These errors—most of which are probably undiagnosed owing to the lack of retrospective analysis—are far from benign. They contribute to regulatory accumulation, a force that disproportionately harms low-income households, deters innovation, and slows economic growth, without delivering offsetting benefits. The reduction of the error rate requires a process that ensures the development and application of high-quality information, both before and after the effects of regulations have been observed. Regulatory budgeting represents one option to achieve just that.

Regulatory budgeting would lead to the creation of better information about the effects of regulations. Simultaneously, it would create incentives for regulators to act upon that information, promulgating those regulations that offer the greatest benefit relative to costs and eliminating regulations that impose an undue burden on the American people.

Some Nuance on the $15 Minimum Wage

by Levi Russell

Adam Millsap at the Mercatus Center has a great short piece on the effect the $15 minimum wage would have on labor markets. Though Millsap criticizes the $15 minimum wage, he does it in a very different way than any I've seen.

He takes as a starting point Arindrajit Dube's conjecture that the minimum wage should be set at 50% of the median wage. It's important to note that Dube is actually a proponent of the $15 minimum wage but believes that it could create problems, especially if the ratio is above 80%.

Millsap uses data from Washington D.C. and Minneapolis, MN to calculate the (projected) ratio of the $15 minimum wage to half the median wage in each of these cities. Millsap shows that in Minneapolis, the $15 minimum wage is projected to be 86% of the median wage for people 16 years of age and older. In D.C., the ratio is only 53%.

So, given Dube's preference for a minimum wage set at 50% of the median wage and warning about a minimum wage over 80% of the median, the $15 minimum is potentially very problematic for cities like Minneapolis. I imagine that it would be far worse for smaller rural communities.

Yes, Virginia, Plowing is Pollution

by Levi Russell

Obviously the title is meant to be facetious. I'm just in shock about this ruling and am concerned about the ramifications it will have for producers in the future.

Below I reproduce a short Farm Futures article that summarizes a recent court decision in California regarding the Clean Water Act. As cynical as I am, this decision did surprise me.

---

Judge Kimberly Mueller on June 10, 2016 in the U.S. Eastern District Court of California found that John Duarte, a nursery operator and wheat farmer, plowed wetlands, four to six inches deep, and therefore violated the Clean Water Act (CWA).

The Judge found Mr. Duarte, by chiseling a pasture, discharged fill material into a water (vernal pool) of the United States. Get this! The Court wrote “In sum, soil is a pollutant. And here, plaintiffs instructed [a contractor] to till and loosen soil on the property.”

This plowing, according to the Court, caused “…the material in this case soil, to move horizontally, creating furrows and ridges.” You will not believe this. 

The Court wrote, “This movement of the soil resulted in its being redeposited into waters of the United States at least in areas of the wetlands as delineated...” In sum, the Judge found that chiseling no more than a few inches of soil constituted an addition of a pollutant to a wetland.

Stunning!

The Court also evaluated whether the tractor and soil chisel plow were point sources under the CWA. The Court cited cases which found that bulldozers, backhoes, graders, tractors pulling discs and rippers can be point sources under the CWA.

The Court describes Mr. Duarte’s equipment as having 7 shanks with 24-inch spacing and each shank was 36 inches long. The Court wrote, “The equipment loosened and moved the soil horizontally, pulling the dirt out of the wetlands [vernal pools] and redepositing it there as well.” 

Vernal pools are described as meeting all three wetland parameters. They are dry the majority of time. As a result, the Court found that the equipment used to aerate the soil was a point source under the CWA.

Under the CWA there must be a discharge of a pollutant to navigable waters from a point source. Again, it is believed that to have a discharge of a pollutant, there must be an addition of the pollutant to the navigable waters. It is also believed that farming operations allegedly have an exemption under the CWA which exempts certain activities of farming and ranching from CWA permitting requirements. (The Court seems unaware that farming is considered a nonpoint source covered by section 319 of the CWA)

The CWA regulations defines farming and declares “Normal farming…activities such as plowing, seeding, cultivating, minor drainage and harvesting for the production of food, fiber and forest products,…” are not activities which are prohibited or regulated under the CWA. Plowing is also defined by EPA as meaning “…all forms of primary tillage, including moldboard, chisel or wide-blade plowing, discing, harrowing and similar physical means utilized on farm, forest or ranchland for the breaking up, cutting, turning over, or stirring of soil to prepare it for the planting of crops.”

The Court found that Mr. Duarte’s activities did not meet the exemption EPA has provided for farming. The Court believed that the land being aerated by Mr. Duarte had not been land used for farming activities but for the grazing of animals. (Grazing or pasturing of animals apparently is not an agricultural activity!) The Court believed the farming operation which could be exempted had ceased to operate as a farm, and that Mr. Duarte was engaging in new agricultural activities. 

Legal complications

The case is extremely complicated from a legal standpoint where Mr. Duarte sued the Army Corps of Engineers (Corps) claiming the Corps had violated his 5th Amendment right to due process and his 1st Amendment right against retaliatory prosecution. According to the opinion, there were two rounds of motions to dismiss significant evidentiary objections and objections over what constituted hearsay. The U.S. Department of Justice filed a counterclaim against Mr. Duarte using the CWA and won.

Basically the case says plowing can be a polluting activity particularly in areas that can be identified as vernal pools, vernal swales, seasonal wetlands, seasonal swales and areas where there may be intermittent and ephemeral drainages.

Mr. Duarte had purchased the land in order to plant winter wheat. He had been very careful in hiring consultants to identify any wetlands. Apparently what he did was insufficient according to Judge Mueller, an Obama appointee, who served as a City Councilwoman in Sacramento. In addition she has worked as a U.S. Magistrate Judge but appears to have no experience in agriculture. It shows!  It is indeed surprising that an attempt to grow wheat on approximately 450 acres results in the violation of the CWA.

Mandated GMO Labels: A Regressive Tax

by Levi Russell

The predictable effects of mandatory GMO labeling will be felt very soon in Vermont and those with low incomes will be especially hard-hit. Supermarkets in the state will lose some 3,000 products from their shelves. The video on this news story is telling: people don't seem to know much about GMOs and don't really think about the negative effects of mandatory labeling. Anti-GMO organizations such as Greenpeace have been accused of running a fear campaign that isn't supported by scientific evidence. There's no evidence that GMOs are harmful to people, but a law requiring them to be labeled very likely will be.

The federal law passed in the Senate will require companies to use QR codes or dedicated websites to provide information about the presence of genetically modified organisms in their food. The compliance costs associated with this law include the addition of the QR code or website URL to the packaging, the development of the databases with the required information, and the maintenance of this database as farming practices and ingredients change. The latter two will likely be far higher than the former and will affect food prices for the foreseeable future.

Here are some of the potential indirect effects:

1) Less consumer choice - The article linked above shows that this is already becoming a reality. I suspect those 3,000 products will come back to shelves eventually, but the development of new products is now more costly due to the necessity of adding information to GMO databases.

2) Higher prices - Additional costs to food companies will effectively shift the food supply curve to the left and raise prices.

3) Less innovation - Though "very small" food companies are exempted from the rule, many startups are created with the goal of becoming mass-market products (If you don't believe me, just watch an episode of "Shark Tank."). This requirement will be another cobweb of red tape these companies have to get through to get on consumer shelves.

Maybe all these costs are worth it. Given the lack of scientific evidence of harm and the fact that humans have been modifying the genetics of food in a far more haphazard way for a very, very long time, I have my doubts. The reality is that the costs mentioned above will fall disproportionately on those with the lowest incomes. Those with moderate to high incomes will be able to pay more for the food they really want, but for those who spend a substantial portion of their income on food already will find it harder to make other ends meet.