Wednesday, June 10, 2015

Plaintiff is over a barrel without a protectable trade secret

Giles Const., LLC v. Tooele Inventory Solution, Inc., 2015 WL 3505309, No. 2:12–cv–37 (D. Utah June 3, 2015)
Giles alleged that the defendants, including individuals, improperly disclosed and used its trade secrets related to barrel processing and pricing, resulting in violations of the CFAA, the Lanham Act, and the Utah Uniform Trade Secret Act (UTSA), as well as tortious interference with contractual relations, unjust enrichment, and conversion. The court found that all the claims failed as a matter of law.
ATI is a large company that sells titanium, using barrels to ship its product.  The individual defendants had some relationship with ATI, and for a few months in 2011, Giles supplied, refurbished, and shipped barrels for ATI. Tooele now provides barrel processing services to ATI, after submitting a lower bid.  When Giles was hired, ATI provided it with a sample barrel and specifications for barrel dimensions; Giles found a barrel supplier through a 15-minute web search.  Giles had an account with this supplier, but no contract, nor did ATI have an exclusive contract with Giles for barrel processing; rather, Giles agreed to fulfill any purchase orders ATI sent.
ATI began searching for a less expensive barrel processing service, with direct purchase of barrels and a separate vendor for processing. It found Giles’ supplier; when it sought bids for barrel processing alone, only Giles and the newly formed Tooele submitted bids.  Giles alleged that ATI revealed trade secrets to Tooele, making it possible for it to underbid Giles.
Giles first alleged that certain defendants violated the CFAA by obtaining Giles Construction’s proprietary information on ATI computers and then divulging that information to competitors in violation of ATI’s corporate guidelines.  But misuse of information acquired with authorization does not constitute “access[ing] a protected computer without authorization, or exceed[ing] authorized access.” In reaching this conclusion, the court discerned a trend in the courts towards adopting a narrower view of the CFAA, which was consistent with the statutory text (including its definition of actionable damages) and the rule of lenity. Thus, defendants were entitled to summary judgment.

So too with the Lanham Act claim, since the Lanham Act doesn’t cover misuse of confidential information.  There was no allegation of any misleading representation to any consumers.
The trade secret claim failed. The identity of Giles’ barrel supplier was not a trade secret, because it could be easily ascertained with basic research.  As for Giles’ pricing information, Giles failed to produce evidence that its pricing or pricing method was unique or especially innovative.  Finally, Giles’ barrel processing process was not a trade secret.  There was ample evidence that ATI instructed Giles on much of the process, and palletizing and wrapping barrels for delivery is a well-known process in the shipping industry.
After the trade secret claims failed, the Utah Uniform Trade Secrets Act preempted “conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret.” This preemption reached any state law claim that is based on allegations of misuse of confidential information, “regardless of whether the claim contains additional, separate allegations.” That is, claims that are to some degree based on misuse of information are preempted even if they’re not solely based on that misuse: “if the claim fails without the allegations regarding misuse of information, the UTSA preempts it. This is so even if the purported confidential information does not constitute a trade secret, which forecloses the ability to alternatively plead causes of action if they are based on the misuse of information.”  That was true here.

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