UnIntellectual Property (UnIP): Trade Secret for Software File
The United States District Court for the Eastern District of Michigan granted summary judgment to Defendant and denied Plaintiff’s Motion for Reconsideration stemming from a dispute involving competitors that both provide software to the alarm industry.  While both companies compile information and monitor signals for alarm companies, such as home security systems, they use different software platforms to do so.  When one of Plaintiff’s alarm companies switched to Defendants, this dispute arose.  Rather than summarize, I am including the relevant portion from the decision below:
“Count one of the second amended complaint alleges that Defendant violated the Michigan Uniform Trade Secrets Act, Mich. Comp. Laws §§ 445.1901–1910. Specifically, count one alleges that in July 2011 Ms. Condon misappropriated Plaintiff’s trade secrets when she “initiated file transfers of proprietary signal processing intelligence software,” the ALSCHART file. Second Am. Compl. ¶ 12; see id. ¶¶ 13–19. “Prior to its theft by Defendant in July of 2011,” count one elaborates, “the signal processing intelligence at issue was neither known nor readily ascertainable by any proper means…. Dice protected the secrecy of this information by restricting access to this information to its employees.” Id. ¶ 14.
The Michigan Uniform Trade Secrets Act, as its name suggests, protects a specific type of information: secret information that has commercial value. Mich. Comp. Laws § 445.1902(d); Kubik, Inc. v. Hull, 56 Mich.App. 335, 224 N.W.2d 80, 87 (1974) (“To be a trade secret, the information must, of necessity, be a Secret”). The act defines a “trade secret” as
information, including a formula, pattern, compilation, program, device, method, technique, or process, that is both of the following:
(i) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use.
(ii) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
§ 445.1902(d); see also Hayes–Albion v. Kuberski, 421 Mich. 170, 364 N.W.2d 609, 614 (1984) (quoting Restatement (First) of Torts § 757 cmt. b. (1939)).4
2 A claim of misappropriation of trade secrets has three elements: “(1) the existence of a trade secret; (2) the defendant’s acquisition of the trade secret in confidence; and (3) the defendant’s unauthorized use of it.” Stromback v. New Line Cinema, 384 F.3d 283, 302 (6th Cir.2004). In this case, Plaintiff establishes none of the three elements.”
The Court went on to analyze each of the three elements.  Most poignantly, Plaintiff could not establish the existence of a protectable trade secret.  It held that “the data obtained for ESC Central from the ALSCHART file in July 2011 via the Thoroughbred query was not a secret, much less Plaintiff’s trade secret.”  The information was not kept secret from customers like ESC, Plaintiff’s own user manual lists the ALSCHART among the files the customers are able to query, and customers had unrestricted access to the file.  Ultimately, “the information obtained from Ms. Condon’s query of the ALSCHART file belongs to ESC Central—not Plaintiff.”
Once again, software trade secret cases are being decided based upon how the alleged software trade secret is identified, including what it contains.  Moreover, this fact pattern matches that of so many others involving a dispute amongst competitors.  Regardless, chalk up another decision that can provide further precedent in the ever-evolving world of software trade secret litigation.
Dice Corp. v. Bold Technologies, 913 F. Supp. 2d 389, 406-07 (E.D. Mich. 2012), reconsideration denied (Mar. 28, 2013).

 

One Response to Software File Deemed Not a Trade Secret in Michigan

  1. The Sixth Circuit has affirmed this decision, stating as follows:

    Dice fails to explain how this information, even if uniquely coded, is a trade secret. The ALSCHART is a compilation of labelling codes created by manufacturers, not Dice. The codes were collected by Dice’s customers, not Dice. Dice has not put forward an explanation of how the value of its unique labelling is derived from it not being readily ascertainable by proper means. And Dice has not produced any evidence to that effect.

    Dice Corp. v. Bold Technologies, 12-2513, 2014 WL 260094 (6th Cir. Jan. 24, 2014)

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