Continuing with our trade secrets litigation topic this week, a Michigan District Court ruling points out another important aspect of a trade secrets misappropriation claim: The fact that a defendant (former employee) had access to valid trade secrets does not necessarily mean that he can be sued for misappropriation just because he got a job at a competing company.
In Dana Limited v. American Axle and Manufacturing Holdings, Inc., 10-cv-00450 (WDMI, August 19, 2013), a former employee and his new employer were sued for allegedly misappropriating trade secrets from the plaintiff (previous employer).
On summary judgment, the court knocked down the trade secrets claim, pointing out that while it was undisputed that the ex-employee had access and even downloaded the plaintiff’s trade secrets, the evidence did not show that (1) this downloading was in any way improper, or (2) that defendant or his new employer ever used those trade secrets for their own gain.
As I discussed last week, for a misappropriation claim to stand, first there must be a taking by defendant of actual trade secrets (e.g., information that qualifies for trade secret protection, not just general business information). In the Dana Limited ruling we see this taken one step further, where even though real trade secrets were taken by the defendant (as part of backing up his files before leaving the office on termination day), the plaintiff failed to prove that this taking of information was inappropriate or that it was ultimately used to compete with the plaintiff.
Interesting to note: Under most trade secret laws, a misappropriation claim can stand not just in instances where the trade secrets were used by the defendant, but also in instances where, while not used, they were improperly acquired in the first place (e.g., by theft, bribery, trespass, etc…).
In the Dana Limited case, the plaintiff company had no clause in its employment agreement prohibiting employees from storing company files on their personal computers, so there was nothing improper in the way the defendant happened to walk away with some company files as part of his final backup process.
The takeaway is that when a company has real trade secrets to protect, its employment agreements should contain a clause against storing company information on personal computers.
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