Do public domain trade secrets exist?

Trade secrets come in all shapes and sizes. Even information in the public domain can constitute the source of a trade secret.

Really? Yes. “A trade secret can exist in a combination of characteristics and components, each of which, by itself, is in the public domain, but the unified process, design and operation of which, in unique combination, affords a competitive advantage and is a protectable secret.” Imperial Chem. Indus. v. Nat'l Distillers & Chem. Corp., 342 F.2d 737 (2d Cir. 1965).  

Why is this? Trade secret law does not require the IP holder to be the first to develop an idea in order to be afforded protection. “Novelty and uniqueness are not prerequisites for a trade secret.” Ultraflo Corp. v. Pelican Tank Parts, Inc., 926 F. Supp. 2d 935, 960 (S.D. Tex. 2013). Instead, the policy behind trade secret protection is rooted in “maintain[ing] standard[s] of commercial ethics . . .” whereby an outsider is placed on notice that they will be held liable for stealing the information developed by another. Id. Accordingly, whether some or all of the protected information is derived from the public domain is not the deciding factor in whether there is a trade secret. The analysis is whether the IP holder has taken that publically available information and aggregated it or develop a method or process that provides economic value and done so while maintaining secrecy.

Examples? Courts have recognized multiple instances where publically available information can constitute a trade secret. In Hertz v. Luzenac Grp., a customer list compromised of publically available sources still was a trade secret because “culling the relevant information” from “diverse sources” was a “lengthy” process. 576 F.3d 1103, 1114 (10th Cir. 2009); see also Optos, Inc. v. Topcon Med. Sys., Inc., 777 F. Supp. 2d 217, 238-39 (D. Mass. 2011) (holding difficulty in gathering information one zip code at a time favors it being considered a trade secret).

In Home Buyers Warranty Corp. v. Gentry, the accused claimed the names of realtors could not possibly constitute trade secrets because “they are easily found with a simple Google search.” 2020 WL 6044303, at *4 (D. Colo. Oct. 13, 2020). The Court rejected this overly-simplified logic.  The Court held “[i]t is the identity of the specific realtors and brokerages with whom [the IP holder] established working relationships by means of its research and the work of its sales force that is the trade secret.” Id. at *4.

Patents and other publically available information can also constitute the basis for a trade secret. An IP holder successfully alleged a trade secret when it claimed the basis for the secret was “‘specific combinations and configuration’ of technologies that are in the public domain by way of the patents and the information known within the industry.” EEMSO, Inc. v. Compex Techs., Inc., 305-CV-0897-P, 2006 WL 2583174, at *6 (N.D. Tex. Aug. 31, 2006).

Next week we’ll cover pleading standards when alleging misappropriation.

For more information on the author:  https://www.lrrc.com/Adam-Massaro#overview