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Trade secrets must be … secret
Trade secret misappropriation cases often involve an employer suing a former employee. The U.S. Court of Appeals for the Tenth Circuit heard a case last year that flipped the script — the former employee sued the employer over information he’d copied from yet another previous employer. Read on to learn how this unusual case shook out.
Fired employee strikes back
John Snyder worked as a regional director for Guardian Life Insurance Co. for nearly 10 years. While employed there, he downloaded a national customer list to an Excel spreadsheet and sent it to his personal email account. Metadata showed that he made no meaningful changes to the information.
After Snyder was terminated by Guardian (for reasons unknown to the court), he remained unemployed for almost two years. When Beam Technologies hired him, Snyder claimed the company induced him to disclose the Guardian customer list by promising to pay him “off the books.”
Snyder created three new, state-specific spreadsheets, using the list as a template. He intended to send them to different sets of Beam employees in the respective states. But he “accidentally” included the full Guardian list as a separate tab in all three of the new spreadsheets that he emailed, thereby disclosing the complete list to every recipient. Moreover, Snyder told Beam’s CEO that he purposefully shared the list with the recipients.
A few months later, he was terminated (again for unknown reasons). Two years later, among other claims, he sued Beam for trade secret misappropriation under the Defend Trade Secrets Act (DTSA). The trial court dismissed the DTSA claim before trial, finding that Snyder didn’t establish that he owned the customer list.
Karma kicks in
On appeal, though, the Tenth Circuit didn’t focus on the ownership issue. Instead, it turned its attention to whether, as required by the DTSA, Snyder took “reasonable measures or efforts of secrecy” to maintain the trade secret’s protected status. The court emphasized that “reasonableness” depends on the specific facts involved but always requires a higher level of diligence than normal business precautions.
Snyder claimed that he took the necessary measures by saving the list on his personal computer, a USB drive and his password-protected work laptop — actions the appellate court described as “relatively benign.” Standing on its own, the court said, saving the list on the employer’s laptop without a password or marking it as a trade secret or confidential was unreasonable.
The court noted other unreasonable measures as well. For example, he didn’t label the state-specific lists as confidential, password-protect them or require any Beam employees to sign a confidentiality agreement. By openly sharing the list with multiple Beam employees without any restrictions or notice that it was a trade secret, he failed to take reasonable measures or efforts of secrecy under federal law (as well as the applicable state trade secret law). And Snyder amplified his accidental disclosure by failing to recall the list, notify Beam employees of the mistake, or mark any of the spreadsheets as trade secrets before sharing them.
Mitigation is a must
Although disclosure of a trade secret doesn’t automatically defeat trade secret protection, a plaintiff must take subsequent affirmative action to safeguard the information and mitigate the scope of the disclosure. Snyder not only failed to do that, he also affirmatively ratified his disclosure by telling the CEO it was intentional.
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