UnIP (UnIntellectual Property): Trade Secret for Methods and Undefined Customer List

This case is out of the United States Bankruptcy Court for the Western District of Pennsylvania. It involves the plaintiff, Metal Foundations Acquisition, LLC (“MFA”), against the debtor, Gary L. Reinert, Sr. (“Reinert”). MFA alleges that Reinert converted assets that MFA purchased from this bankruptcy estate (and others), including, specifically for purposes of this post, proprietary trade secrets. The Court was forced to analyze and decide what specific trade secret assets MFA purchased in the asset sale by determining whether particular assets qualified as trade secrets under Pennsylvania law.

Trade secrets are statutorily defined in Pennsylvania as: “Information, including a formula, drawing, pattern, compilation including a customer list, program, device, method, technique, or process that: (1) 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; (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” See Pennsylvania Uniform Trade Secrets Act.

1. Vibrator method for installing metal foundations. The Court held this was not a trade secret “because the vibrator method is known outside of MFA’s business, and could be acquired or duplicated by others by renting and combining existing equipment” and was not subject to reasonable security measures.

2. Z-type metal fin foundation. The Court held that even if it is an improvement over the original type of metal foundation because it provides the same level of structural support as the older model, while being less expensive to fabricate and install, other individuals and entities are using the z-type metal fin foundation and thus it is not a trade secret.

3. Customer lists. Since the Plaintiff did not identify the customer lists with particularity, and there was testimony that these were merely contact lists, it was not entitled to trade secret protection. That said, the Court did note that customer lists may be subject to trade secret protection in Pennsylvania.

4. GAI software computer program used by engineers to create designs for metal foundation installations. The Court did not decide whether it was a trade secret, but instead relied upon language in the asset agreement requiring all copyrights be transferred and defined it as a copyright asset subject to transfer. Perhaps telling, the Court did find that the design drawings created by the GAI software were trade secrets. It ultimately held that Reinert has misappropriated the GAI software and design drawings.

Thus, this case illustrates that trade secret identification is not only important in misappropriation actions, but it can also be important in interpreting contractual provisions that identify assets as “trade secrets.” Long story short, if you use the term as a catchall for various items, be sure those items would qualify as a trade secret under law.

In re Reinert, BR 11-22840-JAD, 2012 WL 5177973 (Bankr. W.D. Pa. Oct. 18, 2012)


 

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