In a case of first impression, a panel of the U.S. Court of Appeals for the Third Circuit articulated a standard under which the use of information that is not protectable as a trade secret may still form the basis of a tort action under New Jersey law. Thomas & Betts Corp. v. Richards Mfg. Co. et al., Case No. 08-3117 (3rd Cir., June 26, 2009) (Barry, J.)
Richards hired the former engineering director of Thomas & Betts (T&B). Within 18 months of his hire, Richards began successfully competing with T&B in a product area in which T&B had held an effective monopoly for the previous 20 years. The district court found that the information that Richards used to build the product was not protectable as a trade secret. Nevertheless, the court ruled that use of the information could be a business tort under New Jersey law, based on a four factor test that considered the following: the degree to which the information is generally known in the industry, the level of specificity and specialized nature of the information, the employer/employee relationship and the circumstances under which the employee was exposed to the information, as well as whether the information is of current value to the employer. The district court ruled that the plaintiff could not satisfy these factors and granted summary judgment. T&B appealed
The appeals court remanded, finding that the district court had based its analysis on post-employment restrictive covenants, which were not at issue. According to the Third Circuit, New Jersey law protects some trade information, even if it “does not raise to the level of trade secret.” While keeping the four factor test, since this was not a trade secret case the Third Circuit modified the factors to consider whether the information was generally available to the public, whether the employee would have been aware of the information if not for his employment, whether the information gave the defendant a competitive advantage versus the plaintiff and if the employee knew the employer had an interest in protecting the information to preserve its competitive advantage.
The court further noted that on remand, when examining the first factor, the district court should examine the plaintiff’s information in totality rather than as individual items, and as to the third factor, the court should consider that the importance of the plaintiff’s information may derive solely from its relationship to other information, even if the other information is well known.