Two well-publicized trade secret decisions in recent months underscore the well-established principle that a combination of components or elements can constitute a trade secret, even if each of the individual components is already known to the public, so long as the combination is itself unique.
In De-Ox Systems, Inc. v. Mountain States/Rosen, L.L.C., 637 F.3d 604 (5th Cir. 2011), the U.S. Court of Appeals, Fifth Circuit reversed a district court’s grant of summary judgment to the defendant upon finding that there was a genuine issue of material fact as to whether the plaintiff’s trade secrets had been destroyed by publication in a publicly available patent application. The plaintiff had designed a “zero oxygen” method for packing fresh meat for shipment and display in retail stores. Defendant, MSTR, contacted plaintiff, Tewari, to see if its method could help MSTR increase the shelf life of its case-ready cuts of lamb. After entering into a non-disclosure agreement, the plaintiff gave a demonstration to MSTR, during which the plaintiff allegedly revealed trade secrets relating to its meat-packing method. The plaintiff later sued, alleging that MSTR had misappropriated the trade secrets by using them in the development of a competing product. The district court granted summary judgment to MSTR, finding that the plaintiff’s alleged trade secrets had been disclosed a year earlier in a 2004 patent application. On appeal, the Fifth Circuit recognized that publication of a patent application can destroy trade secrets, as with any other public disclosure, and acknowledged that each of the individual elements of the plaintiff’s meat-packing method (namely scavengers and gas mixtures) had been disclosed in public patent applications. However, because there was a genuine issue of fact as to whether the combination of these disclosed technologies was a protectable trade secret, the fact that each of these individual components could be found in earlier published patent applications was not decisive.
In Decision Insights v. Sentia Group, Inc., 2011 U.S. App. LEXIS 5151 (4th Cir. Mar. 15, 2011) (unpublished), the U.S. Court of Appeals, Fourth Circuit affirmed that source code may qualify as a protected trade secret, even if comprised of publicly disclosed components, so long as the method by which those components are compiled is not in the public domain. Plaintiff, Decision Insights, is a software company that developed and owns a software program used to prepare negotiating strategies using modeling techniques similar to game theory analysis. Decision Insights brought suit against competitor, Sentia Group, alleging that former employees had misappropriated its trade secrets and used them to create a competing software program for Sentia. The district court granted summary judgment for Sentia, determining that the plaintiff had failed to demonstrate that its software was not generally known or readily ascertainable. The Fourth Circuit vacated and remanded the decision, explaining that “a trade secret might consist of several discrete elements, any one of which could have been discovered by study of material available to the public,” so long as “the method by which that information is complied is not generally known.” In reaching its decision, the Fourth Circuit relied heavily on the testimony of the plaintiff’s founder and employee, both of whom asserted that the compilation of the software as a whole was not public knowledge.