A recent Eighth Circuit Court of Appeals decision, extremely favorable to a plaintiff alleging trade secret misappropriation, holds that protection may be accorded to a compilation of information if reasonable efforts were made to keep the compilation secret, where the compilation adds value to the information, regardless of the amount of the information that already was in the public domain. The defendant, who used the compilation after obtaining it from a third party who was not authorized to provide it, was hammered by the court.
Rolls-Royce developed procedures, approved by the FAA, for repairing and overhauling helicopter engines. The procedures were compiled and disclosed in documents provided to its Authorized Maintenance Centers (AMCs) with, in at least some instances, a proprietary rights legend on the front page. AvidAir, which was not an AMC, acquired the information partly from public sources and partly by a purchase from an AMC that did not have permission to sell it. When AvidAir began using the procedures, Rolls-Royce demanded that AvidAir deliver the compilation documents to Rolls-Royce and cease using them. AvidAir proceeded to file suit in a Missouri federal court seeking a declaratory judgment that the information was not a trade secret and accusing Rolls-Royce of antitrust violations and tortious interference. Rolls-Royce countered with a misappropriation lawsuit in an Indiana federal court. Both Indiana and Missouri have adopted the Uniform Trade Secrets Law. The two cases were consolidated in the Missouri court.
On cross-motions for summary judgment, the trial court ruled in favor of Rolls-Royce and dismissed AvidAir’s claims. A jury then awarded Rolls-Royce $350,000 in damages. The trial court entered judgment on the jury verdict and awarded permanent injunctive relief to Rolls-Royce. The Eighth Circuit affirmed in all respects. AvidAir Helicopter Supply, Inc. v. Rolls-Royce Corp., No. 10-3444 (8th Cir., Dec. 13, 2011).
AvidAir asserted that the non-public information in the compilations was too trivial to be accorded protection. The appellate court rejected that assertion, stating that a compilation has value if it gives the compiler “a competitive advantage,” even if the compiled information itself is generally available. Contrasting a trade secret with a patented invention, the court said that engineering advances are not a prerequisite to trade secret protection: “Unlike patent law, which predicates protection on novelty and nonobviousness, trade secret laws are meant to govern commercial ethics.” Rolls-Royce’s compilation was a trade secret because (a) it consisted of information with value “independent of older publicly available versions,” and (b) Rolls-Royce made “reasonable efforts to keep it secret.” The court stressed that Rolls-Royce showed that the compilation required “a substantial investment of time, effort, and energy,” and so the fact that others could have duplicated it by legitimate means is not a defense to a misappropriation claim. Indeed, “AvidAir’s repeated [unsuccessful] attempts to secure the [compilation] without Rolls-Royce’s approval belies its claim that the information in the documents was readily ascertainable or not independently valuable.”
AvidAir maintained that Rolls-Royce did not try very hard to protect the confidentiality of the compilation. The court responded: “Reasonable efforts to maintain secrecy need not be overly extravagant, and absolute secrecy is not required.” Rolls-Royce’s use of a proprietary legend is evidence of Rolls-Royce’s attempt, and its “[m]isplaced trust in a third party who breaches a duty of confidentiality does not necessarily negate efforts to maintain secrecy.”
The lesson of this ground-breaking decision is that one who makes commercial use of even a minimal amount of confidential information, after obtaining it from a source without authority to provide it, runs a risk of incurring the wrath of a court adjudicating a trade secret misappropriation lawsuit (at least in the Eighth Circuit).