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To endure global crises, the United States needs to better protect domestic innovation


By Major General Bob Dees, U.S. Army, Retired

Russia’s decision to invade Ukraine amid soaring inflation and a global supply chain crisis was no accident. Russian President Vladimir Putin wagered that the United States and its European allies would falter in the face of aggression for fear of collateral economic damage. He underestimated western unity and resolve, but his logic wasn’t altogether wrong. War in Europe is already affecting Americans’ daily life, pushing food and gas prices ever higher. Even if public opinion remains firmly behind Ukraine, these short-term shocks could have long-term consequences for entrepreneurship and innovation.

Innovation is the United States’ foremost strategic asset. Recent research shows that rising geopolitical risk hinders innovation when it is most crucial. Against the backdrop of increasing Chinese and Russian hostility and indefinite commodity shortages, it is therefore essential to our national security that domestic innovation is adequately supported. Bipartisan legislation, such as the U.S. Innovation and Competition Act, is an important step in the right direction, but 30,000-foot solutions tend to overlook ground-level issues, including legal vulnerabilities revealed only in sparsely reported court cases. In this way, Title Source v. HouseCanary, a trade secrets case playing out in Texas, is instructive as to the additional progress needed to protect and encourage innovation.

The United States is a uniquely litigious society, so our courts play a central role in safeguarding innovation. To mitigate intellectual property theft and other exigent threats to American ingenuity, states and the federal government have recently strengthened trade secrets laws. This legislative strengthening has coincided with a boom in litigation, which would seem to suggest that these measures are working as intended. Unfortunately, in trying to shield innovation from one type of threat, lawmakers have inadvertently exposed it to another: fraud.

Enter Title Source v. HouseCanary. Other articles have exhaustively explained the case. Here, only the basic facts are necessary. In 2015, Title Source, a large property valuation and title insurance company, contracted HouseCanary, an upstart analytics firm, to develop an automated property valuation model (AVM) for $5 million per year. When HouseCanary failed to deliver a working product, Title Source sued for breach of contract. HouseCanary countersued, alleging that Title Source had misappropriated its trade secrets with the intention of developing its own AVM. 

Despite damning expert testimony, a Texas jury decided in favor of HouseCanary and awarded it more than $700 million in damages. Shock over the size of the verdict quickly turned to outrage when, just weeks after the trial concluded, multiple former HouseCanary executives testified that the company’s case was essentially fraudulent. Litigation has continued since with no clear end in sight despite compelling evidence that HouseCanary deliberately manipulated Texas’ trade secret laws and jury sentiment to orchestrate a get-rich-quick scheme.

Because trade secret litigation is inherently complex and rarely makes the news, it is easy for lawmakers to dismiss Title Source v. HouseCanary as an anomaly, albeit one with a near billion-dollar price tag. This is a dangerous mistake. HouseCanary has shown how trade secret laws can be weaponized to facilitate the financial sabotage of major corporations. 

While domestic bad actors might be inclined to follow suit, the real threat lies abroad. China is already deploying creative legal tactics to undermine American innovation. There is no reason why, following the HouseCanary model, foreign agents couldn’t sponsor tech startups in the United States to lure American companies into contracts designed to trigger spurious trade secret litigation. Even if only a small percentage of these traps were to succeed, the payoff would still be worthwhile if HouseCanary’s original jury award is any indication. 

Well-intentioned lawmakers can’t be faulted for failing to patch vulnerabilities that they didn’t know existed. That is why Title Source v. HouseCanary, despite its relative obscurity and concerning trajectory, could still have a net positive impact on American innovation and economic resilience if we collectively seize on it as a catalyst for reform. 

Before spending billions more to promote domestic tech and manufacturing, states and the federal government should work to make sure that bad actors, foreign and homegrown, cannot exploit our trade secret laws. This doesn’t mean that existing protections should be weakened—intellectual property theft remains a serious threat to innovation—but that they should be better insulated against misuse. Beyond preventing legal aberrations like Title Source v. HouseCanary, this would help ensure that the United States remains the global leader in innovation and bolster our ability to endure current and future global crises. 


Major General Bob Dees, U.S. Army, Retired, has a breadth of national security expertise, including development of high technology weapons and communications systems. He also served as a consultant to the President’s Commission on Critical Infrastructure Protection.