Summary
Trade secrets remain crucial to companies around the world, preserving their most sensitive and valuable information. From energy to healthcare to agriculture, companies in every industry seek to better develop, protect and enforce their trade secrets and prevent unfair competition.
In 2024, courts in the United States issued hundreds of trade secrets opinions, analyzing a variety of emerging issues on liability and damages. This report summarizes the key elements of trade secrets claims that will likely impact plaintiffs and defendants in 2025 and beyond:
- Identification of Trade Secrets
- Not Publicly Known or Readily Ascertainable
- Reasonable Safeguards or Measures
- Complementing Patent Protection
- Methods of Misappropriation
- Damages and Collection
1. Identification of Trade Secrets
Trade secret identification is the process by which a plaintiff defines the specific information that it seeks to enforce as a trade secret. This process is not only crucial to successful litigation, but it also benefits both parties and the court. Early identification demonstrates that a plaintiff has a legitimate claim, reducing the risk of dismissal. It also streamlines discovery for the parties by focusing on the key information at issue. And early trade secret identification enables courts to better assess the validity of trade secret claims and reduce the risk of fishing expeditions between competitors.
A recent case in 2024 demonstrates the importance of trade secret identification. In Double Eagle Alloys, Inc. v. Hooper, Double Eagle Alloys alleged that its former employee, Michael Hooper, "took with him notes from his time as a sales representative for Double Eagle and over 2,600 digital files downloaded from his work computer onto a portable electronic storage device." No. 19-CV-243, 2024 WL 3166921, at *1 (N.D. Okla. June 25, 2024). Though the files contained categories of information such as "specifications, its pricing, margins, costs, and customer drawings," Double Eagle did not specify which documents were its trade secrets and which were disclosed to third parties without reservation, such as price quotes to customers. The U.S. District Court for the Northern District of Oklahoma recognized the now-common refrain that "trade-secret litigation is accompanied by the risk that a plaintiff will tailor the scope of its misappropriation claims mid-litigation" based on what discovery reveals. Because Double Eagle failed to identify its trade secrets with sufficient particularity to distinguish information that qualified as a trade secret from what did not, the court granted Hooper's motion for summary judgment. The court also rejected that a trade secret "compilation" existed because Double Eagle did not "describe the combination of elements and explain how the 'compilation' is outside the general scope ascertainable by proper means." This case is on appeal before the U.S. Court of Appeals for the Tenth Circuit.
Different courts require plaintiffs to define their trade secrets with different levels of specificity at different stages of litigation. Regardless of the court, trade secret plaintiffs are well advised to proactively identify their trade secrets as part of a pre-litigation assessment and later in their pleadings — without, of course, disclosing the secret. Without reasonably specific trade secret identification, a claim can fail before it reaches trial. Defendants may raise the deficiency early to stall discovery, dismiss the case at the outset or prevail on summary judgment.
For more information on this topic, see also "It's No Longer a Secret — Parties Should Identify Their Trade Secrets Early in Litigation."
2. Not Publicly Known or Readily Ascertainable
Trade secrets must not be publicly known or readily ascertainable. The federal Defend Trade Secrets Act (DTSA) protects a wide variety of information as trade secrets if "(A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information." State laws include similar language.
BlueLinx Corp. v. Edwards illustrates why this element is crucial to trade secret protection. No. 3:23-CV-2503, 2024 WL 3174379, at *1 (N.D. Tex. June 24, 2024). BlueLinx Corp. sued 3Wood Wholesale, Joseph Edwards and Trent Tucker alleging that Edwards and Tucker misappropriated its trade secret information. BlueLinx sought a temporary injunction against 3Wood, Edwards and Tucker to prevent them from using its information and contacting its customers.
The U.S. District Court for the Northern District of Texas denied BlueLinx's request for a temporary injunction, holding that its sworn declarations and exhibits failed to establish that its information was not readily ascertainable through proper means. The court held that "evidence that BlueLinx treats such information as confidential, without more, is not probative of whether the information can be readily ascertainable from other...
