On The Importance Of Early Identification [Of Trade Secrets] And Getting Specific

In a locked vault in Louisville, Kentucky, sits a custom-made computerized safe under 24-hour surveillance. The vault is encased on all sides by two feet of solid concrete. The safe has a half-inch-thick steel door that can only be opened with both a smart key and a personal identification number and only during preset periods of time. It reportedly houses one of KFC Corporation's most valuable assets: Colonel Sanders's handwritten original recipe for its secret blend of 11 herbs and spices. See "To Launch the Ultimate Value Menu, KFC Offers First-Ever Look into New High-Tech Home of One of America's Most Valued Secrets," KFC News, Feb. 10, 2009 (last visited Jan. 22, 2014).

If, despite these extensive efforts to keep this recipe a secret, someone were to gain access to that vault, open the safe, abscond with the recipe, and use it to start a competing fried-chicken franchise, there would be little doubt that something unlawful had transpired, and there would be little difficulty identifying the alleged trade secret at issue. Assuming that the recipe truly is a secret not legally ascertainable by other means, KFC would likely have a solid claim for trade-secret misappropriation.

In reality, however, trade-secret cases are rarely so spicy or straightforward. More common is the situation where a company loses an employee to a competitor and is concerned that the former employee's experience and specific knowledge of his or her previous employer's business will be used to put him or her (or the new employer) at an undeserved competitive advantage. In the absence of an enforceable noncompete agreement, what can the former employer do to avoid losing the value it has invested in proprietary and confidential information such as formulas, software, customer lists, and unpatented inventions? Trade-secret law may provide the answer. But too often, plaintiffs in these situations allege that broad categories of proprietary information were misappropriated without defining the boundaries of what, exactly, they believe qualifies as a protectable trade secret. This article discusses recent cases in which courts have ruled against plaintiffs at various stages of litigation for failing to identify their alleged trade secrets with sufficient particularity. The article also emphasizes that early identification may be essential to the plaintiffs' success.

Although there have been proposals for creating a private right of action under federal law—including the Private Right of Action Against Theft of Trade Secrets Act of 2013 (H.R. 2466)—civil suits for trade-secret misappropriation are governed by state law. The Uniform Trade Secrets Act (UTSA) has been adopted in some form by all states except Massachusetts, New York, and North Carolina. See Uniform Law Comm'n, Trade Secrets Act (last visited Jan. 3, 2014). Under the UTSA, a "trade secret" is any information that (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," and (ii) "is the subject of efforts that are reasonable under the circumstances to maintain its secrecy." Uniform Trade Secrets Act § 1(4). It can include, by way of example, a formula, pattern, compilation, program, device, method, technique, or process. Id.

A plaintiff may not get very far if it merely parrots the words of the statute and alleges that a former employee misappropriated proprietary "formulas," "programs," or "techniques." Although the owner of alleged trade secrets may favor broad allegations to avoid limiting its claims or tipping off its competitors as to where the real secrets in its business lie, "unless the plaintiff engages in a serious effort to pin down the secrets a court cannot do its job." IDX Sys. Corp. v. EIPC Sys. Corp., 285 F.3d 581, 583 (7th Cir. 2002). For this reason, courts frequently dismiss claims, deny...