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Massachusetts Appeals Court Affirms Judgment in Breach of Confidentiality Agreement and Unfair Business Practices Action Involving Weapon Designer

Posted in Trade Secrets, Unfair Competition

By Erik Weibust and Ryan Malloy

In Troy Industries, Inc. v. Samson Manufacturing Corporation and Scott A. Samson, 81 Mass. App. Ct. 1122 (March 21, 2012), the Massachusetts Appeals Court recently affirmed a jury verdict in the Superior Court that awarded damages to the plaintiff, Troy Industries, Inc., based on the defendants’ violation of a confidentiality agreement and the Massachusetts unfair trade practices statute, Massachusetts General Laws, chapter 93A (“Chapter 93A”).

Troy, a recognized U.S. Government Contractor and weapons designer, sued Samson Manufacturing Corporation and its owner (and former Troy employee), Scott Samson, for breach of a confidentiality agreement and misappropriation of trade secrets and confidential business information. Specifically, Troy sought to enjoin the defendants’ unlawful use of its design for weapon accessories that retrofit and upgrade the M-16 rifle, including a firearm handguard for the rifle named the Modular Rail Forend (“M.R.F.”) Troy alleged that, in April 2003, former employee and machine parts manufacturer Scott Samson signed a confidentiality agreement, agreeing to hold in trust and strict confidence Troy’s confidential business information, and not to use Troy’s confidential information for any purpose other than for Troy’s own business purposes. During his employment with Troy, Samson gained access to trade secrets involving the design of the M.R.F. and other, complex weapons accessories. In December 2004, Samson allegedly began advertising and selling on his website the M.R.F. and other accessories designed by Troy, representing the products as his own designs.

The jury awarded Troy $499,500.00 in damages for Samson’s use of trade secrets or confidential business information, plus $152,000.82 in attorney’s fees and costs. The trial court also issued a permanent injunction, barring the defendants from, among other things, manufacturing, contracting to manufacture, or soliciting, advertising, or accepting orders for sale of the M.R.F. or accessories that are substantially similar in design to the M.R.F. and whose design is derived in significant part from confidential information or trade secrets provided to Samson under the confidentiality agreement.

On appeal, the defendants argued primarily (1) that the confidentiality agreement did not create trade secret protection because it did not specify what was confidential, and (2) that Troy publicly disclosed the M.R.F. at a trade show in February, 2004, thereby losing any trade secret protection.

The Court disagreed, finding that Troy took reasonable precautions to protect its trade secrets, including entering into express agreements restricting disclosure, confining the revelation of its trade secrets to Samson so as to avoid their acquisition by unauthorized third parties, stressing confidentiality of the designs and work orally to Samson, and designating drawings as proprietary.

The Court concluded that Samson subsequently used the trade secrets and confidential business information, thereby breaching the agreement with Troy.