Friday, June 9, 2017

"Misappropriation" Is Where It's At

When I speak on trade secrets law - which is fairly often - I get skewered by some BigLaw types and self-described "experts" for suggesting lawyers need to focus on the element of "misappropriation."

So step back.

If a plaintiff files a lawsuit and argues trade secrets misappropriation, what does it need to prove?

Really stretching you, but here goes...

(1) That it has a trade secret; and
(2) That the defendant misappropriated it.

And that would be it.

My point is this, in a very general sense: As a defendant, I can't control what type of garbage the plaintiff pulls by claiming some very vague concept rises to the level of a trade secret - that is, it's so valuable that its competitors will gain a distinct economic advantage if secrecy is lost.

To parrot the person who currently is renting office space in the White me, folks. I have seen this so many times, I get physically ill. Misinformed plaintiff, bolstered by bumptious counsel, takes some "information" that couldn't possibly be valuable secret data and claims some monopolistic right to it against a former insider.

I know it's crap, and my client knows it's crap. But the legal system is not set up to get to a merits decision quickly on whether some concept, idea, or document is a "trade secret."

My other (also somewhat general) point is this: So listen, here's what I (and my client) can control. Whether the defendant engaged in an act of "misappropriation." Some know-it-all reading this post will rebut me and say that you can't determine whether there's been an act of misappropriation without knowing the trade secret.

To that, I say go find another practice area. I'll take my chances. Give me a judge or jury that uses common sense and won't be mesmerized by intricate (often contrived) theoretical arguments. All you're left with is trying to prove what your trade secret is and then dancing around the issue of how that involves my client. If my guy did nothing wrong, I'll win and you'll get your ass kicked again.


What do I mean by misappropriation? Theft, basically. In plain English, did you take something with you or share something to someone else that breached a confidentiality obligation?

There is a statute, of course, so using the Uniform Trade Secrets Act, I'll condense what the law commissioners have to say. Basically, a plaintiff can prove "misappropriation" in one of three ways:

  1. Improper acquisition. This is just what it sounds like. You acquired a trade secret by violating some duty the law recognizes. This is often a contract - like a non-disclosure agreement - but it also means the general obligation of loyalty employees have to their employers. That means you can't take an engineering drawing, e-mail yourself some business plan, or access a computer to download source code to a thumb drive. Those are all affirmative acts that one engages in to "acquire" information that may be trade-secret level data.
  2. Improper disclosure. This, too, ain't that hard. A "disclosure" means that one with access to a trade secret tells someone else what it is. This could be a new employer, a potential business partner, or a vendor. The idea here is simple - the act of misappropriation involves some third-party, who in turn may be liable to the trade-secret owner if that third-party had reason to know something nefarious was going on.
  3. Improper use. A plaintiff also could try to show improper use of a trade secret. This one is harder to prove, and it's here where the "inevitable disclosure" theory often creeps into litigation. In reality, the catch-phrase "inevitable disclosure" was the wrong way to describe the theory from the beginning - it should have been the "inevitable use" doctrine. This branch of "misappropriation" is the toughest to resolve in discovery, because it often pits varying theories of what exactly the defendant is using against the breadth of what the plaintiff is trying to protect. An example helps. Suppose the plaintiff claims that a new, unreleased product in development constitutes a trade secret. What if the defendant leaves and develops his own product that may share some similar functionality or engineering concept, but that differs in significant ways from what the plaintiff had in development? Aggressive plaintiffs' lawyers always will conjure some narrative to implicate "improper use." But the defendant will usually have the equities and the optics on his side.

Remember, too, that the available remedies often are directly linked with which branch of misappropriation is at issue. A case involving improper "use" is going to raise the specter of damages, whereas a quick injunction on improper acquisition or disclosure may mean that damages takes a back seat.

All that said, if you're a defendant or a defendant's counsel, focus on misappropriation. Doing so will allow you to shift the narrative and tell an understandable story to the court. You did nothing wrong regardless of what kind of story the plaintiff is telling about the value of its own information.

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