A recent 9th Circuit Court of Appeals decision confirmed that data derived from a compilation of publicly available information can constitute a protectable trade secret, particularly when a proprietary process is used to compile or search that information.
The case involved employees of an executive search firm using a collection of information (candidate source lists derived from a program called Searcher) that were taken from his former employer to start a competing firm. On the issue of trade secrets, the court addressed whether defendants conduct was a violation of the Economic Espionage Act (EEA) based on the unauthorized downloading, copying and duplicating of trade secrets in violation of 18 U.S.C. §§ 1832(a)(2) & (a)(4); and unauthorized receipt and possession of stolen trade secrets in violation of 18 U.S.C. § 1832(a)(3) & (a)(4).
The Court rejected defendants argument that the alleged trade secret was composed largely, if not entirely, of public information and therefore couldn’t possibly be trade secrets. The rationale was as follows:
[Defendant] overlooks the principle that a trade secret may consist of a compilation of data, public sources or a combination of proprietary and public sources. It is well recognized that it is the secrecy of the claimed trade secret as a whole that is determinative. The fact that some or all of the components of the trade secret are well-known does not preclude protection for a secret combination, compilation, or integration of the individual elements. . . . [T]he theoretical possibility of reconstructing the secret from published materials containing scattered references to portions of the information or of extracting it from public materials unlikely to come to the attention of the appropriator will not preclude relief against the wrongful conduct . . . . The source lists in question are classic examples of a trade secret that derives from an amalgam of public and proprietary source data. To be sure, some of the data came from public sources and other data came from internal, confidential sources. But cumulatively, the Searcher database contained a massive confidential compilation of data, the product of years of effort and expense. Each source list was the result of a query run through a propriety algorithm that generates a custom subset of possible candidates, culled from a database of over one million executives. The source lists were not unwashed, public-domain lists of all financial executives in the United States, nor otherwise related to a search that could be readily completed using public sources. Had the query been “who is the CFO of General Motors” or “who are all of the CFOs in a particular industry,” our analysis might be different. Instead, the nature of the trade secret and its value stemmed from the unique integration, compilation, cultivation, and sorting of, and the aggressive protections applied to, the Searcher database.
Another issue in the case related to defendant using another employee’s password, after his own password was revoked. The court found this a violation of the Computer Fraud and Abuse Act.