How “Secret” is Secret for a Trade Secret?

Top SecretReasonable Efforts to Maintain Secrecy is a Question of Fact
Whether reasonable secrecy efforts were made is a question of fact. (San Jose Const., Inc., 155 Cal.App.4th at 1543 (“[W]hether SJC made adequate attempts to keep its prospective project information secret is for the jury to measure.”); In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 306 (“[W]hether a party claiming a trade secret undertook reasonable efforts to maintain secrecy is a question of fact….”); Mattel, Inc. v. MGA Entertainment, Inc., 782 F.Supp.2d 911, 960 (C.D. Cal. Jan. 5, 2001) (“The determination of whether information is the subject of efforts that are reasonable under the circumstances to maintain its secrecy is fact specific.”). Here, for example, is the office or location in question; is office is “off limits;” do the computers have a password; is access restricted to certain people; are there non-disclosure or confidentiality agreements, even oral ones, in place? Importantly, secrecy efforts need only be reasonable under the particular circumstances involving a specific party, industry and situation. (DVD Copy Control Assn., Inc. v. Bunner (2003) 31 Cal.4th 864, 881(“The secrecy requirement is generally treated as a relative concept and requires a fact intensive analysis.”); see generally CACI No. 4404.) Here, the trade secret plaintiff may not be in the aerospace industry or computer software engineering firm. In this case, we may be talking about small, mom and pop operations. In such a circumstance, whether the security which was implemented by the trade secret Plaintiff was reasonable is a question of fact for the jury.

Eric Papp, Esq.

Can Information That is “Generally Known” Be a Trade Secret?

uniqueWhether Information is Generally Known is a Question of Fact

Whether the subject information is generally known to the public or competitors is a question of fact. (Thompson v. Impaxx, Inc. (2003) 113 Cal.App.4th 1425, 1430 (“The issue of whether information constitutes a trade secret is a question of fact.”).) Again, as the Altavion court held, “…even if some or all of the elements of Altavion’s design were in the public domain and thus unprotectable, the combination was a protectable trade secret if it was secret and had independent economic value.” (Emphasis original) (Altavion, Inc. v. Konica Minolta Systems Laboratory Inc. (2014) 226 Cal.App.4th 26, 47.)

So, the first inquiry is whether or not the information is “generally known” to the public or competitors.  However, even if some aspect is “generally known,” a novel or unique combination of the information may remove it from the “generally known” into a trade secret.

Eric Papp, Esq.

Trade Secrets Do Not Need to Be in Writing

Legal Pad, pen and law book5. Trade Secrets do Not Need to be in Writing

Trade secrets need not be in writing. (Morlife, Inc, 56 Cal.App.4th at 1522 (“to afford protection to the employer, the information need not be in writing but may be in the employee’s memory”); Brocade Communications Systems, Inc. v. A10 Networks, Inc., 873 F.Supp.2d 1192, 1215 (N.D. Cal. June 12, 2012) (“It is this combination of elements that makes the information valuable and not generally known to the public. Moreover, the mere fact that the information is not in a written list is not dispositive of sufficient particularity.”) Here, many trade secret Defendants attempt to make much of the fact that some of the information in contention was in the Defendant’s “head.” However, as cited above, this is not dispositive and, at best, raises an issue of material fact as to what exactly was in the Defendant’s head and what combination of facts, whether in his head or not, fall under the Trade Secret claim.

What if the information is “generally known,” can that still be a trade secret? The next post will cover this question.

Eric Papp, Esq.

Public Information as a Trade Secret

Private Property - public info4. Public Information as a Trade Secret
Importantly, a trade secret may consist of public information and/or elements, combined with information and/or elements that are not generally known, as long as the combination is unknown, kept secret, and has independent economic value. (Altavion, Inc., 226 Cal. App. 4th at 48 (“even if some or all of the elements of [the plaintiff’s] design were in the public domain and thus unprotectable, the combination was a protectable trade secret if it was secret and had independent economic value”) (original italics); 02 Micro Int’l Ltd. v. Monolithic Power Sys., Inc., 420 F.Supp.2d 1070, 1089-1090 (N.D. Cal. March 9, 2006) (court affirmed jury instruction which stated, “Combinations of public information from a variety of different sources when combined in a novel way can be a trade secret. It does not matter if a portion of the trade secret is generally known, or even that every individual portion of the trade secret is generally known, as long as the combination of all such information is not generally known.”); SkinMedica, Inc. v. Histogen Inc., 869 F.Supp.2d 1176, 1194 (S.D. Cal. April 23, 2012) (“A trade secret may be comprised of partly or entirely non-secret elements and still merit protection.”) Often, the Defendants in a trade secret case, as those in the San Jose Const. case, complain that the information sought to be protected by Plaintiff was, in some manner, public. But, again, that is not fatal to a trade secret case. Rather, it is about having all the pieces of the puzzle to the exclusion of all others.

Must Trade Secrets be in writing? The next post will cover this topic

Eric Papp, Esq.

“Information” as a Trade Secret

Hand in the cookie jarImportantly, “Whether information is a trade secret is ordinarily a question of fact.” ( San Jose Const., Inc. v. S.B.C.C., Inc. (2007) 155 Cal.App.4th 1528, 1537 citing: In re Providian Credit Card Cases (2002) 96 Cal.App.4th 292, 300; Thompson v. Impaxx, Inc. (2003) 113 Cal.App.4th 1425, 1430; and Morlife, Inc. v. Perry (1997) 56 Cal.App.4th 1514, 1521, 66 Cal.Rptr.2d 731.) As the San Jose Const. Inc. case held, “Whether that information actually constituted a trade secret is a factual issue for the jury or court to determine at trial, as did the trial court in Morlife.” (San Jose Const., Inc. v. S.B.C.C., Inc. (2007) 155 Cal.App.4th 1528, 1540, citing Morlife v. Perry, supra, 56 Cal.App.4th 1514 at 1521.)

1. Facts as Trade Secrets
Trade secrets can consist of facts. (See Silvaco Data Systems v. Intel Corp., (2010) 184 Cal.App.4th 210, 220-221, as modified on denial of reh’g (May 27, 2010) disapproved of on other grounds by Kwikset Corp. v. Superior Court (2011) 51 Cal. 4th 310 (“Indeed a trade secret may consist of something we would not ordinarily consider an idea (a conceptual datum) at all, but more a fact (and empirical datum), such as a customer’s preferences, or the location of a mineral deposit. In either case, the trade secret is not the idea or fact itself, but information tending to communicate (disclose) the idea or fact to another. Trade secret law, in short, protects only the right to control the dissemination of information.”) (original italics) (Bold emphasis added).)

2. Ideas as Trade Secrets
Trade secrets may relate to ideas, even potentially patentable ideas, as well. (Altavion, Inc. v. Konica Minolta Systems Laboratory, Inc. (2014) 226 Cal.App.4th 26, 54-55 (“[I]t has been held that a trade secret in the broad sense consists of any unpatented idea which may be used for industrial and commercial purposes . . . . In conclusion, it is clear that if a patentable idea is kept secret, the idea itself can constitute information protectable by trade secret law.”) (italics omitted); Mattel, Inc. v. MGA Entertainment, Inc., 782 F.Supp.2d 911, 961-962 (C.D. Cal. Jan. 5, 2011.) Here, for example, if the ideas were kept secret, then, in short, the Plaintiff had all the pieces of the puzzle to the exclusion of all other competitors.

3. Negative Information as Trade Secrets
Trade secrets can consist of “negative information,” or information that results from failed efforts or experiments, because such “dead ends” in research or marketing may have value. (See, e.g., Cal. Civ. Code § 3426.1 comment (“The definition of trade secret . . . includes information that has commercial value from a negative viewpoint, for example the results of lengthy and expensive research which proves that a certain process will not work could be of great value to a competitor.”) (original italics); Courtesy Temporary Service, Inc. v. Camacho (1990) 222 Cal.App.3d 1278, 1287 (“The broader definition in the proposed Act . . . includes information that has commercial value from a negative viewpoint, for example the results of lengthy and expensive research which proves that a certain process will not work could be of great value to a competitor.”) (original italics) citing legis. committee com., Cal. Civ. Code § 3426.1, p. 108.) Here, for example, this is an important observation. Imagine a trade secret defendant who would declines to bid any job they know the Plaintiff is already supplying or that the Plaintiff can supply cheaper.”

This is exactly the type of secret, competitive information that anyone would like to have. Information that allows you to not waste your time, money and energy bidding and quoting and competing with an entity you know you cannot beat on certain jobs or, obversely, know you can beat on others. Oftentimes, the only way to know these competitive outcomes for certain, would be be to use the Plaintiff’s trade secret information, that is, to have all the pieces to the puzzle that the Defendant could use to bid jobs in order to beat the Plaintiff or to avoid other jobs altogether.

The next post will cover “Public” information as trade secrets.

Eric Papp, Esq.