Arkansas Business Litigation Lawyer & Attorney : Allen Law Firm : Serving Little Rock, Fort Smith, North Little Rock

The Eastern District of Arkansas denied a motion to dismiss or transfer in Agri-Process Innovations, Inc. v. Greenline Industries, LLC, 2008 WL 4126909 (E.D. Ark. 9/4/08).

 

Agri-Process Innovations (API) designs and sells biodiesel plants. They worked on several projects with Greenline Industries, but after a falling out, API filed a lawsuit in Arkansas state court. Greenline responded by filing suit in California for trade secret misappropriation, false advertising, and declaration to establish copyright ownership.

 

The California court deferred to the Eastern District of Arkansas to determine which court is the appropriate form. Judge Miller found no red flags to depart from the first-filed rule, and the dispute will proceed in Arkansas.

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The District Court of Minnesota denied a preliminary injunction based on trade secret misappropriation and false advertising in Benefit Resource, Inc. v. Apprize Technology Solutions, Inc., 2008 WL 2080977 (D. Minn. 5/15/08).

 

BRI owns a software product called UBenefit. In 2005, BRI hired Apprize to market UBenefit. In 2007, Apprize developed a competing software called E.A.S.E. and hired away one of BRI's key employees. Apprize then terminated its relationship with BRI and sent an email to UBenefit users that UBenefit will begin reporting information to a Minnesota HMO. BRI then filed this lawsuit.

 

The court denied the preliminary injunction, focusing on BRI's failure to show likelihood of success. The crux of its trade secret claim was an inference that trade secrets had been misappropriated. The court did not find evidence to justify this inference. As to the false advertising claim, there was no evidence that future communications would be disseminated to UBenefit users.

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The Arkansas Court of Appeals affirmed a preliminary injunction in Freeman v. Brown Hiller, Inc., No. 07-717 (4/2/08).

 

Freeman was an insurance agent for BHC. She signed a limited noncompete agreement that prohibited her from soliciting BHC customers for a period of 2 years after her employment ended. The contract also had a provision prohibiting disclosure of trade secrets. The agreement did not contain a geographic limitation. Freeman resigned and immediately went to work for a competitor. Before resigning she accessed, copied and deleted 300 of BHC's computer files.

 

The trial court granted the preliminary injunction for breach of the noncompete agreement but not for trade secret misappropriation. On appeal, Freeman argued the agreement was really an unenforceable covenant not to compete masquerading as a nondisclosure agreement. The court of appeals rejected this argument and affirmed the preliminary injunction.

 

Although Freeman copied an deleted 300 computer files, BHC did not bring a claim for Computer Trespass or Computer Fraud, which is the focus of this recent Arkansas Lawyer article-- Beyond Trade Secrets: Protecting Business Information in Arkansas.

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The Southern District of Iowa entered judgment after jury trial in a trade secret misappropriation case. C Plus Northwest, Inc. v. DeGroot, 2008 WL 391271 (S.D. Iowa 2/14/08).

 

The facts of the case are not particularly exceptional. Mr. Sjogren owned C Plus; defendants were key employees. Defendants than formed a new company, diverted C Plus customers to their new company, and left C Plus with substantial liabilities. The jury awarded Sjogren and C Plus total damages of $1.295 million to C Plus and Sjogren. The court remitted the award to $752,000 to C Plus and denied individual damages to Sjogren. 

 

The exceptional aspect of this case was the court's  praise of the attorneys' professionalism: "The parties were represented well at trial, and the hard work and professionalism exhibited by counsel for both sides was apparent to the Court, as well as to the jurors." Id. at * 1.

 

 

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The long-standing trade secret dispute between R.K. Enterprises and Pro-Comp Management (previously posted 1/10/07) has finally come to an end on the third appeal. True to form, it took two published opinions to end the case. See Pro-Comp Management, Inc. v. R.K. Enterprises, LLC, No. 07-648 (1/24/08) and R.K. Enterprises, LLC v. Pro-Comp Management, Inc., No. 07-741 (1/24/08).

 

Recap of the first two appeals

In 2004, the trial court let R.K. Enterprises choose if it wanted judgment on the conversion claim or trade secrets claim. They chose conversion, and the court awarded damages of $262,303. The supreme court reversed and said the Arkansas Trade Secrets Act (ATSA) is the exclusive remedy. On remand, the trial court ruled the damages were too speculative for the ATSA. The supreme court again reversed and said the trial court may consider the general law of unjust enrichment in awarding damages under the ATSA.

 

Trial court proceedings the third time around

With the case back for a third determination of damages, the trial court awarded damages of . . . wait for it . . . $262, 303. The trial court did not grant attorney's fees or prejudgment interest. Both parties appealed again.

 

And on appeal a final time

The supreme court affirmed the judgment in all respects. The amount of unjust enrichment was not definite so as to qualify for prejudgment interest, and R.K. Enterprises had already failed to obtain a ruling on its motion for attorney's fees prior to the second appeal. After 4 years of postjudgment litigation and 4 published opinions, the parties find themselves right where they started in 2004.

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The District Court of North Dakota granted a temporary restraining order based on trade secret misappropriation in CDI Energy Services, Inc. v. West River Pumps, Inc., 2007 WL 4180581 (D.N.D. 11/20/07).

 

CDI Energy sells oilfield supplies and provides services to oil companies. The industry is specific an individualized, requiring detailed customer information. Three employees ran CDI's branch in Dickinson, North Dakota. On October 16, 2007, these employees resigned and opened West River Pumps, Inc. They took with them all CDI's customer information, and almost all CDI's customers transferred their business to West River.

 

The defendants chose October 16 because this was a time of year when CDI's customers had increased business. When the defendants resigned, CDI had no employees in Dickinson to meets its customers' needs. The customers had to transfer their business to West River to ensure their needs were met.

 

The court had no trouble issuing the temporary restraining order, finding CDI had established likelihood of success and irreparable harm on its trade secrets claim. CDI was not required to post a bond.

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The Eastern District of Missouri transferred a case involving trade secret misappropriation and breach of a Missouri noncompete agreement in Buckeye Int'l, Inc. v. Unisource Worldwide, Inc., 2007 WL 4178615 (E.D. Mo. 11/19/07).

 

The dispute centered around Craig Sasso. Sasso was a salesman and then manager for Buckeye International's facility in Georgia. He signed a noncompete agreement that was limited to his sales area. Unisource Worldwide hired Sasso, and he began selling products in Georgia. Buckeye filed this suit in Missouri. Unisource filed suit in Georgia and moved to transfer the Missouri case to Georgia.

 

The court transferred the case to Georgia because the witnesses and documents regarding this dispute are located in Georgia. Additionally, the dispute at issue is Sasso's contact of customers in Georgia. Although these are not the typical red flags stated by the Eighth Circuit, the court felt these were compelling circumstances to supersede the first-filed rule.

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The Western District of Arkansas dismissed some of the counts in the counterclaim in Cook v. Illumination Station, Inc., 2007 WL 4166215 (W.D. Ark. 11/20/07) (most recently posted 8/1/07).

 

Cook based her claim for fraud and deceptive trade practices on an employment contract which turned up during the litigation. Cook claimed her signature on this contract was forged. The court held the fraud claim must fail because Cook could not establish detrimental reliance if she did not know about the signature. The deceptive trade practices claim failed because that law protects consumers; it does not regulate the conduct of litigants.

 

Both sides have now dismissed some of the other side's claims. (Cook's dismissal of various claims previously posted 6/15/07)

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The District Court of Minnesota refused to unseal documents containing trade secrets and private information in In re Guidant Corp. Implantable Defibrillators Products Liability Litigation, 2007 WL 2914517 (D. Minn. 10/3/07).

 

The lawsuit involves defibrillators produced by Guidant Corp., which recently merged with Boston Scientific.  The parties had agreed to keep certain documents under seal. Bloomberg moved to intervene and to unseal documents that had been attached to summary judgment motions. The parties agreed to unseal some of the documents but objected to unsealing documents that contained trade secrets of the defendants or private information of the plaintiff. 

 

The court refused to unseal any documents containing trade secrets or private information, which constituted the bulk of the requested documents. The remaining documents will be unsealed.

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Trade secrets must be produced, subject to protective order, in Fair Isaac Corp. v. Equifax, Inc., 2007 WL 2791168 (D. Minn. 9/25/07).

 

Fair Isaac brought suit for false advertising, trade secret misappropriation and related unfair competition claims against Equifax, Experian, and other defendants. The thrust of the complaint is that defendants copied Fair Isaac's algorithms and software used to generate credit scores. In discovery, Fair Isaac sought the algorithm and software used by defendants to generate credit scores. The defendants objected to this discovery claiming the algorithms and software are trade secrets.

 

The court agreed the algorithms and software are trade secrets but that defendants must produce them to Fair Isaac. A protective order prevents Fair Isaac or its experts from using the information for any purposes other than the litigation. Any violation of the protective order is punishable by appropriate sanctions.

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The Northern District of Iowa denied a motion for temporary restraining order but will schedule a hearing on the motion for preliminary injunction in FastServers, Inc. v. TLDS, LLC, 2007 WL 2611820 (N.D. Iowa 9/6/07).

 

FastServers claims that TLDS took an internal passwords database, which contained client information, from their internal computer network. TLDS then posted some of this information on its website. FastServers moved for a temporary restraining order based on trade secret misappropriation and interference with business relationships. 

 

Rule 65 requires that a motion for TRO must be supported by an affidavit or verified complaint, which FastServers failed to do. The court denied the motion for TRO but will set the matter for a hearing on the motion for preliminary injunction.

 

FastServers also failed to assert a claim for violation of the Computer Fraud & Abuse Act, even though it alleges the information was taken directly from its internal computer network. It will be interesting to see if this claim gets added.  

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The District Court of South Dakota granted a temporary restraining order based on trade secret misappropriation in Poet Plant Management, LLC v. Simpson, 2007 WL 2493514 (D.S.D. 8/29/07).

 

The opinion is brief, but Simpson is a former employee of Poet Plant Management (PPM). He is currently employed by Ethanex. PPM claimed Simpson would intentionally or unintentionally disclose its trade secrets and confidential information to Ethanex, which would cause irreparable harm to PPM.

 

The district court granted the temporary restraining order, requiring a $20,000 bond by PPM. A hearing on the preliminary/permanent injunction is scheduled for September 25, 2007, and the court has expedited discovery to accommodate the hearing.

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The District Court of Minnesota dismissed trade secret claims and refused to permit amended pleading to add a computer fraud claim in Boston Scientific, Inc. v. Ev3, Inc., 2007 WL 2493117 (D. Minn. 8/29/07).

 

Boston Scientific originally filed a patent infringement claim against Ev3. Discovery revealed that Ev3 obtained trade secret documents related to the patent at issue, and Boston Scientific was permitted to amend the complaint to add a claim for trade secret misappropriation. The trade secret claim later expanded to include numerous documents unrelated to the patent claim. Ev3 moved to dismiss the trade secret claim for lack of supplemental jurisdiction.

 

The court held that when the trade secret claim added issues beyond the patent claim, it ceased to have a common nucleus of operative facts with the patent claim. The court dismissed the trade secret claim for lack of supplemental jurisdiction.

 

Boston Scientific also asked the court for leave to amend the trade secret claim as a violation of the Computer Fraud and Abuse Act. The court declined this request because the request did not meet the formal procedure required by the court, and the deadline for amending pleadings had already passed.

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The Eastern District of Missouri denied a motion for temporary restraining order based on a noncompete agreement in Tank Tech, Inc. v. Neal, 2007 WL 2137817 (E.D. Mo. 7/23/07).

 

Tank Tech repairs storage tanks used in the petroleum industry. Neal was a foreman that signed a noncompete agreement. Shortly before joining a competitor, Neal emailed company information to his personal email account. Tank Tech filed this suit for breach of the noncompete agreement.

 

The court denied the TRO because Tank Tech failed to establish the elements of trade secrets under Missouri law. Even if Tank Tech had overcome this hurdle, the noncompete agreement is subject to a reasonableness challenge: the agreement applies for 5 years and covers the entire continental United States.   

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The defendants have filed a significant counterclaim in the Arkansas trade secret case Illumination Station v. Cook (previously posted here on 4/13/07 and here on 6/15/07).

 

The defendants filed an answer and counterclaim which raises no less than 40 affirmative defenses and numerous causes of action. The counterclaim makes three general allegations:   (1) plaintiffs forged an employment contract which plaintiffs used to defeat defendants' motion to dismiss. Defendants maintain they were never employees of plaintiffs; (2) plaintiffs failed to pay defendants for sales made while defendants were associated with plaintiffs; and (3) plaintiffs wrongfully induced defendants to sever their relationship with plaintiffs.

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The Eighth Circuit affirmed a grant of judgment as a matter of law in SL Montevideo Technology, Inc. v. Eaton Aerospace, LLC, 2007 WL 2002543 (8th Cir. 2007).

 

SL Montevideo brought suit against Eaton Aerospace for trade secret misappropriation and breach of a nondisclosure agreement regarding an airplane motor. SL Montevideo could not establish the information was a trade secret, so it relied on the contract claim on appeal. The Eighth Circuit affirmed, noting that SL Montevideo somehow chose to structure the nondisclosure agreement as having a trade secret requirement:

To be sure, agreements such as the Proprietary Information Agreement (PIA) may protect broader categories of information than trade secrets. But the PIA's exclusions limited its protection to information having the same characteristics of secrecy and novelty as trade secret.

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The District Court of Minnesota granted a temporary restraining order in Wells Fargo Investments, LLC v. Bengtson, 2007 WL 2007997 (D. Minn. 7/9/07).

 

Wells Fargo hired Bengtson in their wealth management department. Part of the employment contract contained a non-solicitation and a nondisclosure agreement. Bengtson left Wells Fargo to join Merrill Lynch. He immediately began soliciting Wells Fargo clients and disclosing information to Merrill Lynch. Wells Fargo brought suit for breach of contract and trade secret misappropriation.

 

The court had no trouble granting the TRO, but its take on Bengtson's defense is interesting. Bengtson argued that Wells Fargo should be barred by the doctrine of unclean hands because they encouraged him to bring over client lists when they hired him from Piper Jaffray. The court rejected this argument, holding that Wells Fargo must have been guilty of unconscionable conduct in their employment contract with Bengtson for unclean hands to apply.

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The District Court of Minnesota granted summary judgment in Questar Data Systems, Inc. v. Service Management Group, Inc., 2007 WL 1847259 (D. Minn. 6/25/07).

 

Questar Data and SMG are competitors in the customer satisfaction research and consulting business. This case began in a separate lawsuit in Missouri. Brian Wunder left SMG to join Questar, and he sued SMG for severance payments. SMG counterclaimed against Wunder for breach of employment agreement and trade secret misappropriation.

 

As part of the Missouri suit, SMG issued a subpoena to Questar that sought confidential information. Questar resisted, but a Minnesota court compelled compliance. After Questar complied with the subpoena, SMG voluntarily dismissed its counterclaims against Wunder.

 

Questar brought this suit claiming abuse of process, interference with contract, and unfair competition in issuing the subpoena. However, Questar could not show any evidence that SMG acted in bad faith in issuing the subpoena. The court granted summary judgment to SMG.

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The District Court of Minnesota granted a partial preliminary injunction in H.B. Fuller Co. v. Mooney, 2007 WL 1827240 (D. Minn. 6/22/07).

 

H.B. Fuller is an adhesive manufacturer that operates in 34 countries. Mooney, a strategic manager, signed a noncompete agreement. However, he took a job at Coim USA, one of H.B Fuller's competitors. Mooney took with him customer files and copied thousands of computer files. Fuller filed suit for breach of the noncompete agreement and trade secret misappropriation.

 

The court partially granted the preliminary injunction. Mooney is enjoined from disclosing information about Fuller's customers or strategies, but he is permitted to continue his employment at Coim USA. Moreover, the court based the injunction on the noncompete agreement claim; the court found that H.B. Fuller failed to show a likelihood of success on the trade secret claim. The preliminary injunction only has an initial term of 3 months and still commanded a $40,000 bond.

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The Western District of Arkansas dismissed some of the counts in Illumination Station, Inc. v. Cook, 2007 WL 1624458 (W.D. Ark. 6/4/07) (previously posted on 4/13/07).

 

Illumination Station filed suit against defendants claiming trade secret misappropriation and 7 other counts. Defendants moved to dismiss 5 of the counts based on preemption. Their argument was based on R.K. Enterprises, LLC v. Pro-Comp Management, Inc., 356 Ark. 565 (2004) (previously posted 1/10/07), holding that the Arkansas Trade Secret Act preempts tort causes of action.

 

The court granted the motion to dismiss as to the counts for conversion and an accounting. Although the court denied the motion as to the remaining counts, the court granted the defendants leave to file a reply to the motion to dismiss.

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The Eastern District of Missouri held that numerous issues of fact exist in the trade secret misappropriation case Insituform Technologies, Inc. v. Reynolds, Inc., 2007 WL 1198889 (E.D. Mo. 4/19/07).

 

The dispute began when Robert Vance left Insituform to join Reynolds, Inc. Insituform filed suit against Vance and Reynolds for trade secret misappropriation and related torts. Both parties moved for summary judgment. The court sharply criticized these motions given the numerous factual disputes and denied both motions. 

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The Western District of Arkansas denied a protective order in Rotoworks Intern. Ltd. v. Grass USA, LLC, 2007 WL 1106108 (W.D. Ark. 4/11/07) (previously posted 3/5/07).

 

Rotoworks subpoenaed telephone records from Defendants. Defendants moved for a protective order asking that the records be restricted to plaintiff's counsel's use only and that plaintiff's counsel be prohibited from contacting customers. Defendants claimed the phone records are trade secrets.

 

In a brief order, Judge Hendren found that Defendants failed to present any evidence that the telephone records were trade secrets and denied the requested protective order.

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Illumination Station and Berman Industries filed a lawsuit against two former employees in the Western District of Arkansas (Case No. 07-3007, filed 2/28/07). The Complaint alleges claims for copyright infringement, trade secret misappropriation, and related torts.

 

Berman provides copyrighted lamp designs to Illumination Station ("IS"). The Complaint alleges that the former IS employees copied these designs and took IS trade secrets to open a new company, Grandview Gallery. The defendants have not yet filed an Answer.

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In a nationally-watched case involving trade secrets, Wal-Mart obtained a temporary restraining order against former Wal-Mart engineer Bruce Gabbard. The trade secrets at issue are those surrounding Wal-Mart's "Project Red" security system. Coverage by ArkansasBusiness.com, SmartMoney.com, ArkansasOnline.com.

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The District Court of Minnesota ruled on several motions in limine and dismissed one claim in a major trade secrets case. See CardioVention, Inc. v. Medtronic, Inc., 2007 WL 853472 (D. Minn. 3/20/07).

 

CardioVention brought suit against Medtronic for trade secret misappropriation, unfair competition, and breach of contract. Medtronic filed 15 motions in limine and a motion to dismiss the unfair competition claim. The court dismissed the unfair competition claim because it is duplicative of the trade secret claim.

 

The court also made various rulings on the motions in limine, most importantly the court permitted testimony by CardioVention's expert. The case is currently in trial, which began March 19 and is scheduled to proceed through April 13.

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The trade secret dispute between Interbake Foods and BoDeans Wafer (previously posted 2/5/07) reached a settlement. See Interbake Foods, LLC v. BoDeans Wafer Co., LLC, 2007 WL 869051 (N.D. Iowa 3/20/07).

 

The parties entered into a settlement agreement and then filed a joint motion for permanent injunction and retention of jurisdiction. The court granted the motion. Under the terms of the order, the preliminary injunction previously granted is converted into a permanent injunction. The court will maintain jurisdiction for one year to enforce compliance with the settlement agreement.

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The District Court of Minnesota required production of trade secret documents subject to protective order in Kia Motors America, Inc. v. Autoworks Distributing, 2007 WL 844674 (D. Minn. 3/19/07).

 

Kia brought suit against Autoworks for trademark infringement. Kia sought information regarding Autoworks' suppliers to determine if the goods sold by Autoworks were counterfeit. Autoworks refused, claiming this information is a trade secret.

 

The court required disclosure but also issued a protective order limiting disclosure of the information to just Kia's litigation attorneys. The court ordered that Kia's general outside counsel and in-house corporate counsel could not have access to the information.  

 

The court issued a stern warning against wrongful disclosure: If the suppliers suddenly stop doing business with Autoworks or change the nature of the business relationship, the court will presume that Kia's litigation attorneys made a wrongful disclosure. The court reserved the right to impose sanctions and attorney's fees for such conduct.  

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The Eighth Circuit affirmed a $2 million dollar judgment based on trade secret misappropriation and breach of confidentiality agreements in Synergetics, Inc. v. Hurst, 2007 WL 313585 (8th Cir. 2/5/07).

 

Synergetics sells laser equipment for eye surgery procedures. Messrs. Hurst and McGowan held high-level sales positions with Synergetics. Both Hurst and McGowan signed confidentiality agreements that prohibited them from using Synergetics' confidential information during or after their employment. 

 

Hurst and McGowan formed a competing company during their employment. They constructed equipment using Synergetics' confidential designs and contacted Synergetics' customers about the new company, which they opened 2 weeks after terminating their employment. The court was not hard pressed to affirm the judgment of $1,759,165 actual damages and $293,194.16 punitive damages per defendant.

 

Hurst and McGowan presented a novel argument regarding confidentiality agreements. They argued these agreements cannot be enforceable unless they have time and geographic limitations like noncompete agreements. The court rejected this argument because these limitations have never been required in confidentiality agreements. This case reflects the growing trend of limited noncompete agreements to protect confidential information and avoid the pitfalls of noncompete agreements.

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High technology in the ice cream sandwich industry was displayed in Interbake Foods, LLC v. Tomasiello, 2006 WL 3302678 (N.D. Iowa 11/13/06).

 

Interbake owns a 95% share of the wafer market (a wafer is the sandwich part of an ice cream sandwich). Interbake takes great steps to preserve its recipes, formulas, and processes as trade secrets. Tomasiello was an upper level manger for Interbake and had access to all the secrets. He signed a Code of Conduct prohibiting him from disclosing these secrets, but he was not required to sign a noncompete agreement.

 

BoDeans is a successful ice cream cone company that entered the wafer market in 2006. BoDeans hired Tomasiello in October 2006. Just before he left, Tomasiello accessed numerous computer files at Interbake containing trade secrets and confidential information. However, Interbake could not show Tomasiello was using its trade secrets at BoDeans.

 

In a split ruling, the court enjoined Tomasiello and BoDeans from misappropriating Interbake's trade secrets but did not enjoin his employment with BoDeans. More importantly, the court ordered both defendants to preserve all electronic data they have relating in any way to BoDeans' recruitment of Tomasiello.

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The District Court of Minnesota kept trade secret documents sealed in an access to judicial records case. See Cardiac Pacemakers, Inc. v. Aspen II Holding Co., Inc., 2006 WL 3079410 (D.Minn. 10/24/06).

 

Cardiac and Aspen were involved in a trade secret dispute and by agreement of the parties, the court entered a protective order. The court granted partial summary judgment to Cardiac; the briefs and supporting documents remained under seal. The parties settled the dispute, and the court dismissed all claims .

 

Public Citizen, a consumer advocacy organization, moved to intervene to unseal the summary judgment briefs and supporting documents. Its argument was based on the common law right of access to judicial records. See Webster Groves Sch. Dist. v. Pulitzer Publ'g Co., 898 F.2d 1371 (8th Cir. 1990).

 

After conducting an in camera review of documents containing trade secrets, the court found there was no reasonable alternative to keeping these documents sealed. However, the court held that the summary judgment briefs would be unsealed in their entirety. 

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This is a long post, but the trade secret misappropriation case between R.K. Enterprise and Pro-Comp Management is setting several important precedents regarding damages under the Arkansas Trade Secrets Act (ATSA).

 

The trial court originally held that Pro-Comp misappropriated R.K.’s trade secrets, but the trial court permitted R.K. to decide whether it wanted remedies under the Arkansas Trade Secret Act or companion tort claims. Judgment of $262,303.00 was entered on the tort claims.

 

The Arkansas Supreme Court reversed, holding that the ATSA preempts or displaces tort causes of action. R.K. Enterprise v. Pro-Comp Management, 356 Ark. 565 (2004). By doing so the court joined the clear majority of jurisdictions with similar statutes. The case was reversed for a determination of damages pursuant to the ATSA only.

 

On remand, the trial court found that damages were too speculative for either actual losses or unjust enrichment. The court entered judgment for R.K., holding that Pro-Comp could not establish damages under the ATSA. In its determination, the court relied on Brown v. Ruallam, 73 Ark.App. 296 (2001) that the court could not look to the general law of unjust enrichment when determining unjust enrichment under the ATSA.

 

Pro-Comp appealed, and the Supreme Court reversed Brown, holding that a trial court may look to the general law of unjust enrichment when deciding an ATSA case. Pro-Comp Management, Inc. v. R.K. Enterprises, LLC, 366 Ark. 463 (2006). The court affirmed the ruling of no damages for actual loss but reversed for a consideration of unjust enrichment pursuant to the reversal of Brown. Id.

 

While this case has produced some important rules for Arkansas trade secret law, the parties may end up exactly where they started in 2004.

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Trade secrets are governed by state law.  In Arkansas, the Arkansas Trade Secrets Act (ATSA) is the controlling statutory scheme.  See A.C.A. § 4-75-601, et seq.  Arkansas courts also supplement these provisions with common law principles.  A trade secret misappropriation claim consists of two elements:  (1) a valid trade secret; and (2) misappropriation by the defendant.

 

1.     Existence of a Trade Secret

A trade secret is defined by statute as:

(4)  information, including a formula, pattern, compilation, program, device, method, technique, or process, that:

(A)  Derives independent  economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(B)  Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

In addition to the statute, courts consider a six-factor analysis in determining whether information qualifies as a trade secret:  (1) the extent to which the information is known outside the business; (2) the extent to which the information is known by employees and others involved in the business; (3) the extent of measures taken by the company to guard the secrecy of the information; (4) the value of the information to the company and to its competitors; (5) the amount of effort or money expended by the owner in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.  Tyson Foods, Inc. v. ConAgra, Inc., 349 Ark. 469 (2002).

 

2.     Misappropriation by the Defendant

Misappropriation is defined as:

(A)  Acquisition of a trade secret of another by a person who knows or who has reason to know that the trade secret was acquired by improper means; or

(B)  Disclosure or use of a trade secret of another without express or implied consent by a person who:

(i)  used improper means to acquire knowledge of the trade secret; or

(ii)  at the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was:

(a)  derived from or through a person who had utilized improper means to acquire it;

(b)  acquired under circumstances giving rise to a duty to maintain its secrecy or limits its use; or

(c)  derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limits its use; or

(iii)  Before material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

 

The main point is that the trade secret owner has a cause of action against both (1) the party who wrongfully  uses the trade secret; and (2) the party who wrongfully acquires the trade secret.

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