United States: Wake Forest Leaks Scandal May Offer "Playbook" For Businesses Seeking Trade Secret Protection

Last Updated: January 10 2017
Article by Trade Secrets Watch

After a long political season that took many twists and turns due in part to revelations from WikiLeaks, the holiday season finally arrived. For many, that meant family traditions, time away from work, and massive amounts of college football, thanks to the current litany of televised bowl games.

Although sports are usually a welcome respite from the scandal and intrigue that drive the news cycle, readers of this blog will know that the sports world is no exception.

Case in point:  the recent scandal involving Wake Forest University's football team, which, thanks to the internet, has been dutifully hash-tagged and given the moniker "#WakeyLeaks."

For those who haven't followed the story, here's a brief recap.

Tommy Elrod, a former assistant coach at Wake Forest, who later took a job as a radio broadcaster covering the team, is alleged to have shared Wake Forest game plans with other college football teams.  Wake Forest officials began their investigation after reportedly finding suspicious materials left behind by University of Louisville coaches following the Demon Deacons' loss to Louisville in November 2016.  During that game, play on the field suggested that Louisville's coaches had an uncanny knowledge of Wake Forest's game plan.

Since the story broke, several universities have admitted to receiving Wake Forest game plans.  The Atlantic Coast Conference has fined Louisville and Virginia Tech for their involvement.  Although this dispute might not lead to litigation (a Wake Forest spokesman has said publicly that the Deacons "consider the matter closed on our end"), we at TSW can't help but wonder about the trade secrets implications of this story.

Sports Illustrated recently ran a nice analysis by Michael McCann, a professor at the University of New Hampshire School of Law and legal analyst for the magazine.  In it, McCann explores possible arguments that Wake Forest might advance against Elrod, as well as possible defenses that Elrod might raise.  McCann's analysis is expansive, covering trade secrets, racketeering, defamation, and possible first amendment issues.  Our focus is on trade secrets and, specifically, what lessons businesses may take away from this story in order to protect their own trade secrets.

While North Carolina has not adopted the Uniform Trade Secrets Act, its law is very similar and generally borrows heavily from the Act.  See North Carolina Trade Secrets Protection Act, §§ 66-152 to 66-157 (Supp. 1983) (effective Oct. 1, 1981).  Under North Carolina law, a trade secret includes business or technical information that has (1) independent economic value from not being generally known or readily ascertainable through independent development or reverse engineering; and (2) is the subject of reasonable efforts to maintain its secrecy.

Independent Economic Value

First, it's reasonably clear that a football playbook has independent economic value.  Ticket sales, merchandise, and TV revenue are all predicated on a team's ability to win games.  And success on the football field doesn't just depend on the talent of players.  It also depends on the strategies that coaches help them execute on the field.  The lofty salaries that many top-tier college football coaches earn provide some hard numbers to support this argument.

Just as investment in a coaching staff buttresses Wake Forest's argument here, companies in a variety of industries can similarly point to their investments in human capital and R&D to show that some aspect of their business is valuable.

What's less clear is whether Wake Forest's plays were "readily ascertainable" to others. In other words, once a play makes its way from the playbook to the field, a rival team's coach has the ability to watch the play unfold (and later review it in detail), thereby discerning any alleged "secrets." As we've noted before, some courts focus on how much effort is necessary to ascertain the information at issue (the more effort required, the less likely it is to be "readily ascertainable").

As a result, companies should carefully review to what extent the ideas they seek to protect could become available to the public or are capable of easy reverse engineering by competitors.  The answers to these questions will allow a company to evaluate the financial costs associated with protecting such information against the risks of disclosure and loss of potential trade secret protection.

Reasonable Efforts to Maintain Secrecy

There is little doubt that most football teams take a number of efforts to maintain the secrecy of their playbooks. Teams often restrict access to practice fields to outsiders, including the media in some cases.  Coaches and players often cover their mouths when talking to one another during games.  Many of them use code words when calling out plays (such as Peyton Manning's now famous exclamation "Omaha" during last year's Super Bowl).

While barking out code words would probably liven up most corporate workplaces, the practical takeaway here is that the secrecy measures must be tailored to the nature of the trade secrets.  A belts and suspenders approach is probably wise (e.g., don't think only of technological barriers such as passwords and encryption; consider physical barriers such as surveillance cameras and keycard access as well).

There are certainly many factors not known at this point, including what, if any, confidentiality agreements existed between Elrod and Wake Forest during the time he had access to watch practices as a member of the media.  But as Wake Forest coach Dave Clawson told reporters, the team plans to revisit its media policy in the near future:  "We've always tried to be media friendly, we've always given access to media — probably more than any other program in the ACC.  That will have to change."

Similarly, trade secrets owners will want to consider the pros and cons of allowing even limited access – whether it be the media, employees of a joint venture, interns, vendors, or the general public.  And before making such important decisions, they should seek counsel to develop best practices for identifying and protecting trade secrets, including the implementation of appropriate nondisclosure and confidentiality agreements.

In the meantime, stay tuned to this blog for continued updates as we intend to follow this story to its full conclusion.

Twitter: @TS_Watch

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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