Entities do not have the right to claim a privilege against self-incrimination. Accordingly, even though agents of a corporation may refuse, based on the Fifth Amendment, to comply with a court order requiring the individuals to submit an affidavit stating whether their principal has ever possessed specified products that allegedly embody purloined trade secrets, the corporation itself must abide by the order even though the effect may be incriminate the agents.
PCS4LESS, LLC and an affiliated company sued a corporation and certain of its employees in a Michigan state court, alleging that the plaintiffs were the exclusive licensees with respect to certain software, which constituted trade secrets, used in the secondary market for refurbished cell phones. The plaintiffs claimed that the defendants had misappropriated the software. The court was asked to enter a TRO directing the defendants neither to use nor to destroy the trade secrets, and to deliver the products containing the software to the plaintiffs.
Initially, the defendants denied that they possessed, or ever had possessed, the products. However, when the court required submission of an affidavit to that effect, the defendants declined on the ground that the information at issue was protected by the Fifth Amendment. Plaintiffs moved to compel all of the defendants to comply with the earlier order, the court granted the motion, and they appealed.
The Michigan Court of Appeals agreed with the employees that their own privilege against self-incrimination could be compromised if they, individually, were forced to comply. So, the trial court’s order was reversed to that extent. But the appellate court affirmed the order requiring the corporate defendant to submit the affidavit, rejecting the argument that compelling the corporation to reveal whether it has possessed the software essentially would disclose the same information that the individual defendants were excused from providing. The court pointed out that “organizations with independent existence apart from their individual members may not assert the Fifth Amendment privilege.” Analogizing the individual defendants to custodians of corporate records, the Court of Appeals stated that “the custodian of an organization’s records may not refuse to produce records even if those records might incriminate the custodian personally.” PCS4LESS, LLC v. Stockton, Nos. 296870 and 09-000380-CZ (Mich. Ct. of App., Mar. 8, 2011), citing Paramount Pictures Corp. v. Miskinis, 418 Mich. 708, 344 N.W.2d 788 (1984).
The PCS4LESS case shows that wrongful possession of someone else’s proprietary information can lead not only to a civil suit for damages but also to criminal prosecution. Trade secret counsel should be consulted promptly by anyone charged with misappropriation.