Employer METI guarded its confidential financial information by, among other methods, locking printed versions in a corporate vault and password-protecting the information with the password provided only to those who signed non-disclosure agreements.
Shortly before departing METI’s employ, employee Romeo allegedly downloaded thousands of his employer’s confidential financial documents onto multiple flash drives. After he was employed by METI competitor ISS, he allegedly used the information in a PowerPoint presentation to ISS staff. ISS saved the presentation and referred to it in subsequent strategy meetings.
In Management & Eng’r’g Tech. Int’l, Inc. v. Information Sys. Support, Inc., No. 10-17784 (9th Cir., July 23, 2012), the trial jury’s verdict that METI’s financial information constituted trade secrets under the Arizona Trade Secrets Act, and that Romeo and ISS misappropriated them, was held to be supported by the evidence. Although ISS claimed that the proof showed possession but not use of the misappropriated property, the appellate court declined to second-guess the jury’s verdict regarding liability.
Expert witness testimony at trial concerning the value of METI’s financial information withstood ISS’ challenge to its admissibility. The expert was CEO of his own intellectual property consulting company, and he had more than 20 years of experience valuing such property for use in damages litigation and licensing transactions. The Ninth Circuit quoted from its own 2010 decision in Primiano v. Cook, 598 F.3d 558, 564: “Shaky but admissible evidence is to be attacked by cross examination, contrary evidence, and attention to the burden of proof, not exclusion.”
But METI was not entirely successful on appeal. At trial, METI also claimed trade secret protection for its employee roster and its ranking in a non-party’s industry-wide “process improvement” program. All of this information was held to be publicly available and, thus, not a trade secret. Moreover, METI’s expert witness testified to the lump sum a hypothetical buyer would have paid for all of the claimed confidential information but failed to show the value of just the information held on appeal to constitute trade secrets. So, the damages award was vacated and the case was remanded for further proceedings. Lastly, the appellate tribunal rejected METI’s challenge to the trial court’s denial of METI’s motions for awards of exemplary damages and attorneys’ fees.
Because the Ninth Circuit’s opinion is not precedential, the lessons learned from this case may have limited significance. However, the court did approve the way METI showed that it maintains the confidentiality of financial information. Perhaps the most important take-away for a plaintiff who alleges misappropriation of different categories of confidential information is to consider, in order to protect against only partial success because some categories are held not to constitute trade secrets, proving damages separately for each of the several categories.