UnIntellectual Property (UnIP): Trade Secret for General Engineering Knowledge

The United States District Court for the Western District of Michigan has issued an opinion following a jury trial involving a relatively common set of facts.  Plaintiff, Dana, fired Defendant Wenstrup, an engineer for their business of manufacturing axels and other parts for the automobile industry.  After 9 months of unemployment, Wenstrup became employed by American Axle, and helped identify engineers who could assist American Axle with providing parts for its commercial vehicle customers, which happened to include two Dana employees, Turner and Adelman.  American Axle hired Turner and Adelman, and all three joined Wenstrup as Defendants in this lawsuit and were alleged to have violated the Michigan Uniform Trade Secrets Act (“MUTSA”).

The MUTSA defines “trade secret” as follows:
(d) “Trade secret” means 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.
The first determination was whether a protectable trade secret exists.  Michigan courts consider the following factors in determining if information is a trade secret:

(1) extent to which information is known outside of owner’s business, (2) extent to which information is known by employees and others involved in business, (3) extent of measures taken to guard secrecy of information, (4) value of information to owners and competitors, (5) amount of effort and money expended in developing information, and (6) ease or difficulty with which information could be properly acquired or duplicated by other.

The Court first recognized that “[i]t is clear that some of the information taken by the individual defendants from Dana constitutes trade secrets, but not to the extent suggested by Dana. “[T]he general knowledge of an employee does not constitute a trade secret.””  It went on to analyze individually the following alleged trade secrets:

1. The Engineering Data Book contains information on all of Dana’s commercial drive axle products.  “Because Dana did not take sufficient steps to preserve the confidentiality of the information in the Engineering Data Book, the Engineering Data Book was not a trade secret.”
2. Testing, namely tests run on new axle development.  The Court held that “the tests fall within the scope of general knowledge gained in the course of Wenstrup and Turner’s professional experience.”
3. Development of the 40K Axle.  “The hiring of individuals with expertise in a certain area is not sufficient to show that those individuals used confidential information. None of the individuals had a covenant not to compete with Dana.”
4. Product Improvement Information.  “Although Dana has shown that it used powdered metal, Dana has not shown that using powdered metal was a concept unique to Dana, that it was not known in the industry, or that it was a concept that Dana or its supplier kept secret or confidential.”
5. Gear Development Information.  Since there was no evidence that it was used, there was no misappropriation.  “Dana has attempted to blur the distinction between the generic information that was disclosed or used with the trade secret information that was downloaded.”
6. Pricing and Cost Information, which included margins.  “Wenstrup’s mere confirmation that American Axle’s estimated prices were close to what he recalled from Dana is an application of general knowledge rather than the disclosure or use of trade secret information.”
7. Other Information, namely the identity of a supplier.  “Although Dana contends that this information was confidential, Dana has made no showing that the information was confidential, that it had independent economic value, or that Dana used reasonable efforts to maintain the identity of its supplier as a secret.”
Although recognizing that certain information alleged may qualify as a trade secret, “the Court finds no basis for holding any of the defendants liable under the MUTSA because Dana has not shown acquisition by improper means, nor has Dana shown use or disclosure of any trade secrets.”
I can’t help but include the Court’s conclusion, verbatim, as it is one that is likely applicable in so many disputes with a fact pattern similar to this one.
“Based on the copying of substantial Dana confidential information by employees who were leaving to work for a competitor, Dana’s concerns about the misuse of confidential information were justified. However, after engaging in exhaustive discovery and strenuously litigating this case, Dana has not managed to support its suspicions with concrete evidence. Dana’s voluminous exhibits do not support the conclusions Dana requests the Court to draw. Despite Dana’s continual assurances that it would link the Defendants to the violations alleged, Dana failed to do so. At the end of the case, after careful and thoughtful reflection, the Court concludes that Dana has not come close to preponderating on any of its claims. The Court will accordingly enter a judgment of no cause of action on all of Dana’s claims in favor of all of the Defendants.”
Dana Ltd. v. Am. Axle & Mfg. Holdings, Inc., 1:10-CV-450, 2013 WL 4498993 (W.D. Mich. Aug. 19, 2013).

 


 

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