MIAMI BUSINESS LITIGATION: DEFENSE AGAINST TRADE SECRET MISAPPROPRIATION BASED ON “MODIFICATION OR IMPROVEMENT”

Under the Federal Defend Trade Secrets Act as well as the Uniform Trade Secret Act adopted by many states, unauthorized use of trade secret information and unauthorized acquisition or disclosure of trade secret information may constitute misappropriation. The legal concept of “misappropriation” includes not only the wholesale pirating of an idea, but also the unauthorized utilization of an idea as a starting point or guide in developing a process, or as a means to understand what pitfalls to avoid. The United States Court of Appeals for the Seventh Circuit in Mangren Research & Dev. Corp. v. Nat’l Chemical Co., Inc., 87 F.3d 937 (7th Cir. 1996), explained that “the use of another’s trade secret is liable even if he uses it with modifications or improvements upon it effected by his own efforts, so long as the substance of the process used by the actor is derived from the other’s secret.” Peter Mavrick a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration. In business litigation seeking to prove trade secret misappropriation, a plaintiff will usually need to rely on circumstantial evidence. In SI Handling Systems, Inc. v. Heisley, 753 F.2d 1244 (3d Cir. 1985), the federal appellate court explained that “[m]isappropriation and misuse can rarely be proved by convincing direct evidence. In most cases plaintiffs must construct a web of perhaps ambiguous circumstantial evidence from which the trier of fact may draw inferences which convince him that it is more probable than not that what plaintiffs allege happened did in fact take place. Against this often delicate construct of circumstantial evidence there frequently must be balanced defendants and defendants’ witnesses who directly deny everything.” For this reason, “[r]arely will the plaintiff in a misappropriation of trade secrets case discovery the ‘needle’ in his opponent’s ‘haystack” of documents. Nor is it likely that plaintiff’s counsel will enjoy the ‘Perry Mason moment’ when the defendant’s chef executive officer buckles under the weight of cross examination and admits that his company has misappropriated the plaintiff’s trade secret.” Savor , Inc. v. FMR Corp., 2004 WL 1965869 (Sup. Ct. Del. 2004) (interpreting Delaware version of Uniform Trade Secret Act). Particularly when they rely on circumstantial evidence to prove their cases, plaintiffs sometimes make strategic mistakes in how they present trade secret misappropriation cases. Plaintiffs have confronted problems where they insist a trade secret is comprised of all elements of its alleged secret, and that none of the elements can be separated from the whole. In such cases, plaintiffs must establish misappropriation of the entire trade secret to prevail. In this regard, the United States District Court in New Jersey explained in Vital State Canada, Ltd. v. Dreampak, LLC, 303 F.Supp.2d 516 (D.N.J. 2003), that an “assertion that the trade secret is a combination of the elements is crucial…since it means that to prove use of the trade secret, [plaintifF] must prove use of each and every element in combination.” It is sometimes more accurate, and prudent, for a plaintiff in trade secret litigation to present multiple trade secrets that work together in a compilation, whereby any particular aspect that is misappropriated would result in liability for the defendant. Such an approach may enable the plaintiff to succeed where a crafty defendant makes slight modifications to the misappropriated trade secret, and defends on the grounds that it is not “using” what is truly the stolen trade secret. In this regard, the Seventh Circuit’s Mangren Research & Dev. Corp. decision explained that “if trade secret law were not flexible enough to encompass modified or even new products that are substantially derived from the trade secret of another, the protections that law provides would be hollow indeed.” Peter Mavrick is a Miami business litigation lawyer, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.