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Raising the bar on claims of trade secret misappropriation


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A new decision by a Federal District Court judge in Minneapolis indicates that it will be more difficult for employers to file lawsuits alleging trade secret misappropriation against former employees.

Hot Stuff Foods claimed that one of its former executives, Dornbach, secretly entered into business relationships with its customers before he resigned from the company, and that he also downloaded and copied its confidential pricing and business planning information from his work computer.  As a result, Hot Stuff sued Dornbach.   In response, Dornbach brought a Rule 12 motion to dismiss claiming that, in light of two recent Supreme Court’s decisions, Hot Stuff’s complaint failed to contain sufficient factual specificity.

One of Hot Stuff’s claims was that Dornbach had misappropriated its confidential trade secrets when he copied information from his work computer.    Dornbach argued that Hot Stuff failed to plead sufficient facts suggesting the existence of a trade secret because Hot Stuff had alleged only generally that Dornbach had access to confidential information concerning its business plans, pricing, margins and sales strategies, and that the company had not set forth specific information that this information met the definition of a trade secret; i.e. that it had independent economic value, was not readily ascertainable by others, and that Hot Stuff took reasonable efforts to maintain its secrecy.

The Court agreed with Dornbach that it is not enough for a party simply to claim, without specifics, that its data is confidential, and that Hot Stuff’s non-specific and conclusory statements were not enough to establish that the copied information met the definition of a trade secret.   Instead, a party must set forth specific facts showing that the information meets the definition of a trade secret.

This case should remind both companies and their lawyers that it will be harder for them to have their day in court when alleging trade secret misappropriation, and that they must be prepared to allege specific facts showing why their information deserves protection.

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