Are Your Trade Secrets Under Lock and Key?

New Missouri cases demonstrate that protection is paramount.

By:  Jim Nowogrocki

 

Trade secret litigation has been on an upward trajectory in recent years, especially with the passage of the Defend Trade Secrets Act of 2016.  As recent Missouri federal decisions show, an essential legal component is that an owner must show that it has taken "reasonable measures" to keep such information secret.

 

With the rising popularity of remote working, along with digitization of information, the increased risk of trade secret misappropriation requires a careful examination whether a company has adopted sufficient measures to meet the legal definition of a trade secret.

 

Two qualifications for a trade secret:

 

Under both the Defend Trade Secrets Act (DTSA) and the Missouri Uniform Trade Secrets Act (MUTSA), a trade secret is defined as information that meets two qualifications: 

 

(a) the owner thereof has taken reasonable measures to keep such information secret; and

(b) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from its disclosure or use.

 

Compare these two differing results from recent Missouri cases:

 

In one case, the plaintiff sought trade secret protection for a database which represented, “a compilation of business contacts and specific information on some 400,000 plus individuals and organizations, including their donation records, contact information, and other information that had proven valuable for fundraising efforts."

 

Examining the threshold issue of "reasonable measures," the federal court noted the following evidence.  Prior to being digitized, the database was kept in a locked safe. After it was digitized, the database was available on only one computer, kept in a locked office with access granted to only a handful of employees. The database was never disclosed to third parties, with the exception of one individual, who wrote the source code and application software that allowed management of the database.

 

In conclusion, the court found that the plaintiff took reasonable precautions to protect the database and satisfied the required qualification to constitute a trade secret.

 

Yet, in a different federal lawsuit, an agriculture technology company claimed that former employees had misappropriated its proprietary information involving precision agriculture and the use of specialized data in farming.  

 

There, the federal court found that the company did not take reasonable efforts to maintain the secrecy of the information it alleged was a trade secret.  Instead, the court ruled that the company shared the information with a third-party contractor without a confidentiality agreement and without other policies or practices for safeguarding secrets.

 

The Court reached this straightforward legal conclusion:  Without such reasonable efforts or measures, there is no secret to protect, and the company cannot maintain a claim under the Defend Trade Secrets Act.

 

The attorneys at Summers Compton Wells are well-versed in safeguarding a company's valuable trade secrets and litigating against misappropriation of them under federal and state law.