Cases from Other state statute

Appellate Court of Illinois, First District, First Division
Illinois Court Finds Lack of Consideration to Support Non-Compete Agreement

Plaintiff Eric Fifield, an insurance administrator, began working for Defendant Premier Services, Inc. (Premier) after Premier acquired Fifield’s former employer in 2009 and offered Fifield employment. As a condition of employment with Premier, Fifield was required to sign a nonsolicitiation/noncompetition agreement that prevented him from soliciting Premier’s customers anywhere in the US for a period of two years following employment. In February 2010, Fifield resigned from Premier and began working for Enterprise Financial Group (EFG). Fifield and EFG filed this action seeking a declaratory judgment invalidating certain provisions of the contract, and Premier filed an answer, as well as a counterclaim for injunctive relief. The lower court ruled in favor of Fifield, holding that the non-solicitation portions of the contract were void for lack of consideration.

On June 24, 2013, the Appellate Court of Illinois confirmed the lower court’s decision, explaining that under Illinois case law, an employee must be continuously employed pursuant to a noncompetition/nonsolicitation agreement for a period of two years before the court will recognize adequate consideration in exchange for a non-compete agreement. Because Fifield left Premier after only 3 months, there was not adequate consideration and the contract was unenforceable.

On September 25, 2013, the Supreme Court of Illinois denied appeal in the case.

Supreme Court of Texas
Texas relaxes standards concerning consideration required to bind employees to non-competition agreements; must be “reasonably related to an interest worthy of protection”

The Texas Supreme Court held that stock options can act as appropriate consideration to bind an employee to a non-competition agreement under Texas law.

The dispute arose between an insurance company, Marsh USA, Inc., and its former managing director, Rex Cook, over whether or not stock options were enough to bind Cook to his non-competition agreement. Cook had started to work for Marsh’s direct competitor and sought to invalidate his non-competition agreement on the grounds that it was unenforceable.

Texas has a statute which dictates that restrictive covenants, such as non-competition agreements, must be ancillary to otherwise enforceable agreements. Prior to the decision in this case, this meant that an otherwise enforceable agreement must “give rise” to the employer’s interest in enforcing a non-competition agreement. The parties disagreed not only on whether or not stock options met the "ancillary to an otherwise enforceable agreement" language, but also on whether or not mere consideration consisting of stock options could "give rise" to or create the interest in restraining competition.

In eliminating the “give rise” requirement and holding that the consideration only need be “reasonably related to an interest worthy of protection, such as trade secrets, confidential information or goodwill,” the court significantly loosened standards for Texas entities seeking to enforce non-competition agreements. The court noted that Marsh satisfied this standard, as the stock options, the value of which is clearly tied to the long-term success of the company, were reasonably related to the company’s interest in its former employee not working for a competitor and in maintaining industry goodwill.

Supreme Court of Connecticut
Connecticut high court rules that UConn’s donor lists are trade secrets

On February 27, 2012, the Connecticut Supreme Court ruled that the University of Connecticut’s donor list is a trade secret and not subject to easy access through a Freedom of Information request. The court reasoned that UCONN spends resources to acquire the information and that other institutions could use that information to lure away dollars and loyalty from those on the list.

In 2009, the Connecticut Freedom of Information Commission (FOIC) had received a complaint alleging that the University of Connecticut (UConn) improperly refused a request for disclosure of the names and addresses of (1) purchasers of tickets to the school's athletic events held by the University Athletics Department and to performing arts events at the Jorgensen Auditorium, (2) persons who made inquiries about programs at the Center for Continuing Studies, and (3) donors to the University Libraries Division. UConn claimed that the requested records were "customer lists" that were exempt from the disclosure requirements of the freedom of information act as trade secrets.

The FOIC ordered the records disclosed, finding that a public entity such as UConn cannot maintain its own protected trade secrets because UConn is largely subsidized by public funds and is not engaged in a trade or business dependent on earned income for its continued existence. On appeal, the trial court found that nothing in the statute suggests that a public agency cannot maintain trade secrets, noting that the university competed with other institutions that operate performing arts, sporting events, and educational programs for a profit, and that compiling these lists had cost UConn much time and effort.

Although the trial court found that the list of donors to the University Libraries Division does not constitute a customer list under the trade secrets exemption because donors are not purchasing goods or services, the court remanded the matter to the FOIC for findings as to whether the records qualify as another type of "information" protected as a trade secret and as to whether the records do not qualify for exemption because they are readily ascertainable from other sources. The FOIC appeals from the decision to the Supreme Court.

In oral arguments to the Supreme Court, the appellant (Connecticut's Freedom of Information Commission, represented by its attorney Clifton Leonhardt) argued that it is conceivable that the University of Connecticut could hold trade secrets, even though the Commission's brief contended the public institution could not. The Commission argued two other factors should make the lists public: because general interest outweighs UConn's need for confidentiality, and because UConn never showed the records were unavailable elsewhere. Later, Leonhardt said in an interview that he does not believe the commission, in its final decision, definitively settled the question of whether UConn can maintain trade secrets. If the commission had found definitively against UConn, he said, such a finding would contradict state law authorizing UConn to create and own intellectual property and to enter into research contracts with private businesses.

On February 27, 2012, the Connecticut Supreme Court ruled that the University of Connecticut’s donor list is a trade secret and not subject to easy access through a Freedom of Information request. The court reasoned that UCONN spends resources to acquire the information and that other institutions could use that information to lure away dollars and loyalty from those on the list.

Southern District of New York
Hilton and Starwood Hotels reach settlement in suit alleging theft of trade secrets and use of secrets to develop competing luxury brand of hotels

The court consented to the settlement reached in January, 2011 between Starwood and Hilton Hotels in the trade secrets case initiated by Starwood in 2009. The suit filed in the U.S. District Court for the Southern District of New York in 2009, related to the defection of two senior executives from Starwood to Hilton. In April 2009, Ross Klein and Amar Lalvani moved to Hilton, taking hundreds of thousands of electronic documents which were essentially the blueprints for the beginning of a hotel brand. The settlement included a $75 million cash payment to Starwood and a permanent injunction which prohibits Hilton from opening any new “luxury and lifestyle” hotels for two years.

Status: A federal grand jury in Manhattan continues to investigate whether Hilton and its former executives should face criminal charges.

Complaint filed Apr. 16, 2009
Permanent injunction issued Dec. 22, 2010.

Southern District of New York
Alleged exploitation of "technological resources" by Oracle competitor

Oracle Systems Corporation, formerly Passlogix (a wholly owned subsidiary of Oracle Corporation that has since dissolved), sued 2FA Technology, LLC. alleging that 2FA threatened illegitimate legal action, breached contractual obligations, exploited Passlogix’s resources, and sought to injure Passlogix's competitive position and reputation. Oracle Systems Corp. filed a motion for partial summary judgment, which is currently pending before the court.

This case is related to 2FA Technology, LLC v. Oracle Corp. (10-cv-9648), a later-filed case by the defendant in this action, currently stayed pending the disposition of the summary judgment motion here.

United States District Court for the Eastern District of Texas
Texas Jury Awards $58 Million for Breach of Confidentiality Agreement

On March 6, 2015, the jury awarded Texas Advanced Optoelectronic Solutions Inc. (TAOS) $58 million dollars for its trade secret misappropriation suit against Intersil after seven years of litigation in the Eastern District of Texas.

TAOS patented technology that empowers flat panel video displays to adjust brightness based on different light exposures. Intersil approached TAOS in 2004 to negotiate a potential merger to enter the light sensor market. During the course of negotiations, both parties signed confidentiality agreements to protect TAOS’ technology and competitive trade secrets – including vendor information.

Then after what TAOS characterized as an unreasonable offer, Intersil severed all ties with TAOS and soon introduced a competing light-sensor product. TAOS demonstrated that Intersil used its patented technology to create this competing product. Additionally, TAOS also demonstrated how Intersil secured supply contracts with Apple by using trade secrets procured from the failed negotiations.

While Intersil states that it will appeal the verdict, the case is a good example for the necessity of employing confidentiality agreements in preliminary negotiations where trade secrets are at stake. In the event a party breaches the agreement, it goes a long way to demonstrate fraud, malice and gross negligence.

California State Court of Appeal for the Fourth Appellate District, Division One
Appellate Court upholds injunction for California waterproofing company barring competing former employees from soliciting customers.

Plaintiff Wanke Industrial is a waterproofing systems installation company in Southern California, former employer of defendants Scott Keck and Jacob Bozarth, who left the company in order to form their own competing waterproofing company, WP solutions. While Bozarth was not named in the proceeding, Wanke filed a complaint against Keck and WP Solutions in 2008 for breach of confidentiality and misappropriation of Wanke trade secret information. The complaint pointed specifically to the significant amount of time, effort and money Wanke had spent in the “acquisition, development, compilation, and maintenance” of confidential customer business, and product information, including

The identity of Wanke’s existing and prospective customers, the objectives of each customer, the strategies developed for each customer, the identities of key personnel at those customers, the special needs and characteristics of Wanke’s existing and
potential customers, and the histories and account balances of existing customers. (Opinion 3-4).

After the former employees responded in cross-compliant against Wanke for unpaid compensation, both parties entered into a mutual release settlement agreement. In this stipulation WP Solutions et al agreed to pay Wanke $38,000.00 in damages, and to a stipulated injunction including a liquidated damages provision. In pertinent part, the stipulated injunction prohibited Keck, Bozarth, and WP solutions from contacting or soliciting any “person, entity, project owner, or representative on Wanke’s attached customer list for the purpose of gaining any business” (Op. 5) for five years, and from performing any work for named customers that solicited WP contracts for 18 months. Wanke subsequently filed an order to show cause in May 2010 seeking to find Keck and WP Solutions in violation of the agreement on eleven occasions.

On Wanke’s motion to enforce the settlement agreement, the trial court determined that although WP Solutions had violated the terms, the agreement itself was invalid “to the extent that it prohibited defendants from soliciting an entity merely because the entity appeared on the customer list attached to the stipulated injunction.” Simply, the trial court determined that Wanke failed to put forth evidence of the existence of a trade secret within the names and identifying information of it’s customers. Although the trial court acknowledged the potential existence of a trade secret within certain customer lists of information, the court emphasized that CA Bus. and Prof. Code §16606 recognizes the right of an employer to bar a former employee from soliciting existing customers of the employer if the employee is utilizing trade secret information to solicit those customers. However, the statute also will void any contract that subsequently restrains any former employee from engaging in an otherwise lawful profession or trade. (CA Bus. Prof. §16602.5). As such, the trial court determined that the stipulated injunction was overbroad and thereby “acquitted” the defendants on eleven counts. In addition, the court further modified the scope of the existing stipulated settlement to be within the bounds of the California unfair competition law. The trial court subsequently examined one count of a specific Wanke customer “AV Builders: Saratoga West” and determined Keck and/or Bozarth to have “obtained or undertaken” their employment contracts while employed by Wanke. Defendants objected on the grounds that the names and general information of perspective customers in their industry was not trade secret material, but the trial court entered an order awarding Wanke $58,000.00 in liquidated damages according to the stipulated injunction, and $8600 in attorney fees.

On appeal, Keck and WP solutions objected on two grounds: (1) in the awarding of attorneys fees to Wanke as a prevailing party, namely because as the trial court determined the stipulated injunction to have been invalid, and therein could not be in contempt of an invalid injunction; and (2) that the liquidated damages award was improper because Keck nor WP Solutions misappropriated Wanke trade secret information or committed any act constituting tortious unfair competition. Wanke followed with a cross-motion and a petition for writ of mandate, both asserting that the trial court erred in determining that the aforementioned stipulated injunction was invalid and unenforceable.

Upon review, the Appellate court fashioned its reasoning by first invoking the double jeopardy clause of the Fifth Amendment to the US Constitution to preclude Wanke’s writ of mandate to retry Keck and WP on the contempt charges. Interestingly, the court in dicta purposefully points to precedent to alleviate any concern of utilizing double jeopardy in a civil matter, first by citing the Dixon court’s determination that the double jeopardy clause applies to “nonsummary criminal contempt prosecutions.” (Op. 15). Further, the court notes the distinction between civil and criminal contempt, namely that civil contempt is and “remedial and for the benefit of the complainant,” and that the contempt at issue was not a forward looking remedy, but a procedure used to punish past conduct in violation of a court order. (citing Int'l Union v. Bagwell, 512 U.S. 821, 827 (U.S. 1994). As such, court determined that the Wanke matter was transformed into a criminal contempt proceeding “between the public and the defendant.” (citing In re Nolan W., 45 Cal.4th 1217, 1236-1237 Sup. Ct. CA 2009). Further, the alleged contempt in violating the stipulated injunction took place outside of judicial proceedings, and therein were deemed nonsummary in nature. As the opinion crafts the Wanke proceedings to fit within the bounds of double jeopardy application, Judge Aaron determined that the lower court validly found that Wanke failed to establish the violation of a valid court order, and therefore their evidence was previously factually insufficient to hold Keck and WP in contempt. This was deemed a sufficient acquittal on a nonsummary contempt claim for the appellate court to deny reexamination of the issue on double jeopardy grounds.

Notwithstanding this determination, the Appellate court concluded that the trial court in fact erred by invalidating the stipulated injunction and denying Wanke’s initial motion to enforce the settlement agreement. The Court reasoned that one could not conclude that the aforementioned stipulated injunction did not protect Wanke’s trade secrets on its face. Merely because the particular trade secret information related to the customers listed and annexed to the agreement did not, for this court, invalidate the existence of trade secret information. Thus, without a proper showing that language in the stipulated injunction actually does not protect Wanke trade secrets, the trial court erred in assuming an unlawful business restraint. Judge Aaron therein reversed and remanded the Wanke matter for further proceedings, while affirming the lower court’s prior order to enforce the settlement agreement as to Saratoga West.

Northern District of Illinois
Despite a modest damages award, plaintiffs win more than a million dollars in attorneys' fees

SKF USA Inc. v. Bjerkness et. al.

Docket Number: 1:08-cv-04709
Case Filing Date: Tue, 2008-08-19
Jurisdiction: Federal Court
Location: Illinois
Court Name: Northern District of Illinois
Summary

SKF USA Inc. successfully brought an action against former employees for willful and malicious misappropriation of trade secrets, consisting of thousands of computer files. A 2010 bench trial resulting in an award of $41,000 in actual damages and $40,000 in exemplary damages. SKF then requested more than $1.25 million in attorneys’ fees and costs. Defendants objected, arguing that such fees failed to take into account prior settlement offers that could have saved costs, were grossly disproportionate to actual damages, and that plaintiff’s billing was excessive. Nonetheless, the court awarded almost the entire requested amount of fees.

Case Report
Relevant Facts and Procedural History

Dale Bjerkness, Kevin Koch, Joseph Sever, and Walter Remick were all employees of Preventive Maintenance Company, Inc. when, in January 2007, it was acquired by SKF USA. Bjerkness had worked his way up through the company from Sales Engineer, eventually becoming a Director for SKF Reliability Systems. Similarly, at the time of their departures, Koch was working as a Reliability Engineer Manager, while both Sever and Remick were working as Reliability Engineers. Defendants continued to work for SKF until May 2008, when Bjerkness departed and opened his own competing enterprise, Equipment Reliability Services, Inc. (“ERSI”). The other defendants soon followed, and it was shortly thereafter determined that ERSI had come into possession of thousands of computer files belonging to SKF. SKF filed suit against the employees and ERSI for violation of the Illinois Trade Secrets Act (“ITSA”). Their 2008 Complaint marked the beginning of what Judge Rebecca Pallmeyer described as “dismayingly contentious litigation.”

In 2009, SKF won a preliminary injunction. In a 2010 bench trial, SKF received damages totaling $81,068 (actual damages in the amount of $41,068 and exemplary damages in the amount of $40,000). Given a finding a willful and malicious misappropriation, the court also awarded reasonable attorney’s fees and costs. When SKF filed a Bill of Costs for $44,852.84, defendants objected that the amount was excessive by $16,495.14. SKF then proceeded to petition the court for an award of attorneys’ fees and non-taxable costs totaling $1,299,579.60. Defendants objected.

Lodestar Calculation

The court first calculated a lodestar figure, a standard method for determining attorney’s fees that entails multiplying SKF’s reasonable billable hours times the reasonable hourly billing rate. Under 7th Circuit law, this calculation is presumed reasonable. In arguing that the figure should be reduced, defendants cited (A) the history of settlement offers between the parties and (B) the proportionality of fees to damages. Also, while defendants did not challenge the hourly billing rates of SKF’s lawyers, it challenged the number of hours billed as unreasonable.

A. Settlement History

Defendants argued that based on the damages awarded by the court, SKF’s rejection of offers to settle constituted bad faith, and therefore justified reducing the Lodestar amount. Defendants showed that they had offered settlements of $173,247 in November 2008, $75,000 in January 2010, and $250,000 in September 2010. They claimed that SKF had been unwilling to negotiate, and that after January 6, 2009 (the date by which Defs. argued SKF had had sufficient time to contemplate and accept the 2008 settlement offer) all efforts to continue litigation were solely directed at eliminating ERSI as competition. Using the damages ruling’s calculation that, as of January 6, 2009, SKF had only suffered $31,494 in damages, Defendants argued that the choice to continue litigation after the November 2008 offer was made in bad faith.

SKF objected to consideration of the parties’ settlement discussions on the grounds that the discussions were supposed to remain confidential. Citing Fed. R. Civ. P. 68, however, the Court found that such confidentiality did not bar consideration of settlement history. In the alternative, SKF put forth evidence that the Defendants’ own Exhibits indicated SKF’s willingness to negotiate, and that it had offered to settle for $455,000 in November 2008. SKF claimed that, even at that figure, it would have taken a loss for attorney’s fees then incurred, and noted that the damages plus requested attorney’s fees that Defendants were not challenging still exceeded the November 2008 offer.

The Court sided unequivocally with SKF, finding no evidence of that the decision to reject Defendants’ offers constituted bad faith. The court put particular weight on the fact that Defendants’ offer did not include attorneys’ fees, when the ITSA makes it likely that such fees will be awarded. The fact that the November 2008 offer also preceded SKF’s win on the motion for the preliminary injunction was also noted.

B. Proportionality

The Court grappled most with the issue of proportionality, clearly concerned by a request for attorneys’ fees totaling more than fifteen times the actual damages awarded. In upholding the fees, however, the Court noted that the Seventh Circuit has declined to set specific limits on the multiples of attorneys’ fees that may be awarded.

More importantly, the Court made clear that a small damage award does not alone demonstrate the unreasonableness of pursing the claim at great expense. The Court cited the Seventh Circuit’s decision in Anderson v. AB Painting and Sandblasting Inc., which states that the existence of a fee-shifting statute precludes the court’s consideration of the reasonableness of the claim. A party who prevails with more than nominal damages, has thereby demonstrated the claim’s validity. The Seventh Circuit therefore directs courts to, “…assume the absolute necessity of achieving that particular result and limit itself to determining whether the hours spent were a reasonable means to that necessary end.” Moreover, the Court cited other cases allowing similar, if not quite as high, proportions of fees-to-damages awards.

C. Excessive Billing

Finally the Court examined whether SKF’s billing was reasonable. In assessing Defendants’ characterization that the total hours billed was “outrageous,” the Court found that Defendants failed to demonstrate adequately that SKF’s billing records were unreasonable. The Court noted that Defendants had not adequately spent time to break down the attorney’s fees, devoting only two pages of their response memo to the issue.

Moreover, to the extent that the hours were extreme, the Court found that activities of both sides were to blame. In the process, the Court criticized both sides’ attorneys for appearing “to fan the flames” of “extraordinarily contentious” litigation, while singling out the defendants for refusing at multiple points to streamline the process. The Court therefore concluded that some portion of the sizable legal bills were in fact directly due to Defendants’ actions. It also agreed with Plaintiff’s assertion that that “the most straightforward evidence that counsels’ fees are reasonable is the fact that the client paid them,” and stated that it would also not second guess SKF’s decision to spend more than $1 million for attorneys to protect trade secrets that it had recently purchased at the time the litigation commenced.

Conclusion

The court granted SKF’s fee request, except for the fee paid to SKF’s damages expert, whose testimony the court mostly disregarded. Given Defendants’ failure to adequately address the removal of such a fee and associated attorney’s fees, the Court subtracted $107,991 from the fee award.

No appeal has been filed. In the wake of the fee award, at least one defendant, Joseph Sever, has filed for Chapter 7 Bankruptcy protection.

Significance

This case demonstrates that Illinois courts will presume validity of attorney’s fees upon the success of a claim, even for an extreme proportion of fees to damages awarded. The existence of the fee-shifting statute supports an award of fees of even more than fifteen times total damages, so long as there is no significant evidence of bad faith or unreasonable fees. There is also the suggestion that any settlement offer might need to demonstrate consideration of attorney’s fees in order to demonstrate a party’s bad faith in continuing litigation. Note that the award here is granted because the 7th Circuit has chosen not to set defined barriers on proportionate awards of attorneys’ fees to damages. Also underlying this case was the particularly contentious nature of the litigation, which the Court addresses at multiple points. General displeasure at the manner in which the case unfolded seems to have helped the Court to justify such a high award.

While the equitable underpinnings of trade secret law might suggest that some limits should be placed on fee awards, such limits remain unarticulated, at least in the Seventh Circuit. For cases of willful and malicious misappropriation, the Defendant still has the opportunity to demonstrate that Plaintiff’s requested fee amount is the result of bad faith. In this case, Defendants failed to do so. Yet it does seem somewhat unusual that SKF should bear none of the burden for the length of the litigation, given that the Court noted poor conduct on both sides. Defendants bore greater weight here, but the Court could still, it seems, have reduced some of Plaintiff’s award.

United States District Court for the Southern District of California
Due to policy concerns, the Southern District of California required pre-discovery identification of trade secrets despite finding California Code of Civil Procedure §2910.210 inapplicable in federal court

     In Jardin v. DATAllegro, Inc., No. 10-CV-2552-IEG (WVG), 2011 WL 3299395 (S.D. Cal. July 29, 2011), the United States District Court for the Southern District of California considered whether the pre-discovery trade secret identification requirement of California Code of Civil Procedure §2019.210 also applies in California federal court. Section 2019.210 requires that trade secrets be identified with reasonable particularity before discovery commences, in an effort to prevent abuse of discovery and to enable defendants to form complete and well-reasoned defenses.

     Jardin concerns a patent dispute, in which plaintiff Cary Jardin alleged that defendant Stuart Frost stole nonpublic information while employed by Jardin. Frost then formed his own company, defendant DATAllegro, Inc., and allegedly used the misappropriated information to file for a patent. Although Jardin involves patent claims, the case implicates trade secrets law because Jardin’s patent claims were based upon the misappropriation of nonpublic information. Therefore, DATAllegro argued that discovery could not be conducted until Jardin identified the allegedly misappropriated information with reasonable particularity, pursuant to §2019.210.

     Magistrate Judge Gallo ultimately declined to apply §2019.210 in federal court. However, Judge Gallo was influenced by the policy concerns underlying §2019.210 and used his discretion under the Federal Rules of Civil Procedure to, nevertheless, order Jardin to identify the allegedly misappropriated information prior to discovery. Jardin objected to this order, but it was upheld by District Judge Irma Gonzalez on July 29, 2011. Judge Gonzalez held that Judge Gallo had committed no error in requiring pre-discovery identification and that he had broad discretion under the Federal Rules to consider policy concerns when granting his order.

District Court of the District of New Jersey
Judge rules that a trade secret does not necessarily lose its secret status simply because it has been posted on the Internet

On August 18, 2011, Judge Walls of the District Court of the District of New Jersey held in Syncsort Incorporated v. Innovative Routines International, Inc. that a trade secret does not automatically lose its secret status if it has been posted online. His opinion, instead, offered practical guidance on how to determine whether a trade secret should remain secret after exposure on the Internet.

The case dates back to July 29, 2004, when Syncsort Incorporated (“Syncsort”) filed suit against its competitor in the data transformation market, Innovative Routines International, Inc. (“IRI”). As explained in the complaint, data transformation is the process of taking data in one form and changing it to another, such as by editing, reordering, or aggregating portions of the data. Syncsort’s and IRI’s data transformation programs (SyncSort UNIX and CoSORT, respectively) were incompatible.

Syncsort alleged that IRI misappropriated 1) the SyncSort UNIX command language, an “extensive symbolic system by which a user instructs the SyncSort UNIX program to perform specific data processing and transformation jobs” and 2) the SyncSort Unix Reference Guide that “defines commands, parameters and syntax and formal grammar definitions of the SyncSort UNIX command language.” In 2000, IRI developed software programs, SSU2SCL and RESCRIPT, which translated the SynSort UNIX command language for compatibility with CoSORT. Syncsort alleged that the translation programs were developed using pilfered scripts from the SyncSort UNIX command language and the Reference Guide, which IRI partly obtained from various websites.

IRI challenged that the scripts it found on the Internet had already lost their trade secret status and that Syncsort did not take precautions to maintain the secrecy of the scripts. Judge Walls, however, declared that “public posting of parts of the command language did not destroy the trade secret because the information contained in those postings were insufficient to develop the translator.” He considered the circumstances around each online posting and concluded that Syncsort did not lose its trade secrets. He wrote, “Widespread, anonymous publication of the information over the Internet may destroy its status as a trade secret.... But publication on the Internet may not destroy a secret if it is ‘sufficiently obscure or transient or otherwise limited so that it does not become generally known to the relevant people, i.e., potential competitors or other persons to whom the information would have some economic concern.’ The guiding ‘concern is whether the information has retained its value to the creator in spite of the publication.’”

Importantly, this decision marks a progressive benchmark in the acknowledgment in federal courts of the vast and pervasive nature of the internet. Moreover, Judge Walls also recognized the inevitable interplay with the internet and trade secret information, and how even if available on the internet, information may retain trade secret status if it cannot be replicated and is of some value.