Trade secrets must remain secret to be protected. Athlete data—biometrics and tracking data—may be a trade secret if used for business purposes that provide an opportunity to obtain an economic advantage over competitors. That could be data used to consider drafting or signing athletes, player development and determining team composition, and player contract negotiations. But leagues, teams, and even athletes who collect or contribute to that data want to monetize that same information by selling or licensing it to broadcasters, mobile app creators, sponsors, and fantasy and betting operators. And the problem with that is that as soon as a trade secret becomes generally known, it’s no longer a trade secret.
The Houston Hack
In 2015, news broke of an alleged computer network hack into the Houston Astros’ system. Christopher Correa, a St. Louis Cardinals executive, used a computer password belonging to a former Cardinals employee to break into the Astros’ player personnel database and email system. This was believed to be the first time that someone at a professional sports team had hacked the network of another team. The FBI and U.S. Justice Department investigated. By July 2016, Correa had been sentenced by a federal judge to nearly four years in prison after pleading guilty to five counts of unauthorized access to a protected computer.
The proprietary information that Correa accessed included scouting reports, trade discussions, player statistics, and notes on recent performances and injuries of team prospects. Federal prosecutors estimated the Astros’ cost of the data hack to be $1.7 million, which included the value of the information that Correa used to draft players for the Cardinals.
The ability to hack and the motivation to use this information emphasizes the value of the data as a trade secret in sports. Athlete biometrics and tracking data falls squarely into the category of proprietary information that is a critical asset—what intellectual property law expert Dean Pelletier calls “competitively valuable information”—developed by a company over time and entitled to trade secret protection.
Sssshhhh, It’s a Secret
Trade secrets by nature are the “secret sauce” to a product. So secret that they are not protected by publicly-available registrations, like trademarks and copyrights, or by issued patents, like inventions.
Instead, trade secrets are defined and protected under common law and state statutes modeled after the Uniform Trade Secrets Act (UTSA) and under the recently-enacted federal statute, the Defend Trade Secrets Act. Trade secrets may also be protected under the Computer Fraud and Abuse Act (CFAA). Courts have defined trade secrets and how misappropriation occurs when they rule on cases such as Correa’s MLB hack. But to what extent athlete data is a trade secret is unclear, especially when it encompasses information that the general public has an interest in.
In general, athlete statistics are newsworthy, public information and are thus free to use by anyone. The exception is if the data is arranged in a creative way so that the whole is no longer just facts. But statistics—especially next generation statistics that will increasingly include athlete biometrics and tracking data—include proprietary information that is typically protected by various laws, including trade secret laws. Indeed some statistics include personal health information that may be entitled to greater protection under HIPAA and other privacy laws.
Where data has corresponding intellectual property rights—if it is a trade secret—its owners are entitled to both control over and compensation for its use.
The Fix to the Paradox
It may be the method of how athlete data is arranged and deployed in business that is the trade secret of the future. That may be one way that sports industry players can monetize biometrics and tracking information while preserving some of the protections of trade secrets. But how commoditization of confidential information will work in practice raises many questions, particularly if the data is disclosed to third parties once commoditized, and therefore not secret. Innovative solutions will be required as more fan engagement and other products that use athlete data evolve.
At least three things will happen in this space. First, common law and statutes will change to better define next generation statistics that include confidential information belonging to athletes, leagues, teams, and their data collectors. To do so, courts and legislators must ask new questions to differentiate personal health information that is a valuable business secret from data that is simply a huge money-maker. Second, the data configuration and how it is assembled, tracked, and disseminated for each use will change so that the data can be protected as a trade secret while also allowing it to be commoditized. Third, cybersecurity measures, hiring practices and employee roles in sports organizations will change to better address the issues presented by biometrics and tracking data that are used both as confidential information and as an important fan engagement revenue stream.
Kristy Gale is an attorney, entrepreneur, and sports technology law pioneer dedicated to helping athletes, entertainers and consumers protect their biometric data.