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June 2016

Is This a Trade Secret? Think Again.

By | Blog, Business Law | No Comments

Businesses jealously guard information they deem confidential and economically valuable.  They may attempt to do so by invoking noncompete and nonsolicitation agreements with former employees to prevent those employees from using such information in the course of new employment.  Where there is no enforceable agreement, they may indirectly seek to interfere with the new employment by accusing the former employee, and possibly his or her new employer, of misappropriating trade secrets, in violation of Wisconsin Statutes section 134.90(2).  A recent court of appeals decision may discourage using trade secret litigation as an intimidation tool by recognizing there are limits as to what categories of arguably valuable confidential information qualify for trade secret protection.

Section 134.90 is Wisconsin’s enactment of the Uniform Trade Secrets Act.  The Act defines “trade secret” as follows:

(c)  “Trade secret” means information, including a formula, pattern, compilation, program, device, method, technique or process to which all of the following apply:

  1. The information 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.
  2. The information is the subject of efforts to maintain its secrecy that are reasonable under the circumstances.

Wis. Stat. § 134.90(1)(c).

On April 28, 2016, the Wisconsin Court of Appeals in North Highland, Inc. v. Jefferson Mach. & Tool, Inc., No. 2015AP643, 2016 WL 1689972 (Wis. Ct. App. Apr. 28, 2016), affirmed a summary judgment dismissing North Highland Inc.’s claim that Frederick A. Wells, a former employee, and his new company, Jefferson Machine & Tool Inc., violated the Act by obtaining from another former employee the amount of a confidential bid North Highland had submitted to Tyson Foods, Inc. for a project at Tyson’s Jefferson, Wisconsin facility misappropriating a confidential bid amount and using that information to present a more favorable bid on behalf of Jefferson Machine.  The court held that North Highland had failed to demonstrate that a confidential bid amount falls within the Act’s definition of “trade secret.”  Acknowledging that the examples of information eligible for trade secret protection—formulas, patterns, compilations, programs, devices, methods, techniques, or processes—did not constitute an exhaustive list, the court nonetheless held that “information” had a much narrower definition than the dictionary meaning of the word.  It encompassed only such information as was similar in nature to the enumerated items.  North Highland failed to demonstrate such similarity.

Accordingly, North Highland teaches that a business cannot establish “trade secret” status simply by satisfying the “economic value” and “attempts to maintain secrecy” criteria in § 134.90(1)(c)1. and 2.  The result also suggests that in the court’s view, confidential pricing information is not the type of information protected under the Act.

If you have been accused of misappropriating a trade secret or want to know whether your confidential business information is entitled to trade secret protection, the experienced business attorneys at Gutglass, Erickson, Bonville & Larson, S.C. are here to help.  Call Atty. Joan M. Huffman at (414) 908-0237.

Trade Secret and Business Attorneys