Balancing the rights of corporations to protect their economic interests with the rights of individuals to freely express themselves can be a complicated act requiring nuanced application of the law; even more so when the corporation is of a religious nature. In a fascinating case out of California, Judge Lucy H. Koh of the United States District Court for the Northern District of California, weighed the merits of a trade secret misappropriation claim made by a religious organization against the merits of two anonymous bloggers’ claims under the first amendment.

The case, Art of Living Foundation v. Does 1-10, 2012 WL 1565281 (N.D. Cal, May 1, 2012), involves two former adherents to the religious and spiritual teachings of the plaintiff who have allegedly since become outspoken critics of the organization. They allegedly went so far as to label the group as a “cult and a sham” and allegedly post the group’s proprietary materials on the Internet. Judge Koh ultimately granted an anti-SLAPP motion for one of the defendant anonymous bloggers, but denied the motion pertaining to the blogger that had allegedly admitted to disclosing and posting AOLF’s alleged trade secret materials on the internet.

The Art of Living Foundation (“AOLF”) is the United States branch of the international Art of Living Foundation based in Bangalore, India, and is a California corporation. Founded in 1981 by Sri Sri Ravi Shankar (“Shankar”), the group boasts chapters in over 140 countries and touts itself as “an international nonprofit educational and humanitarian organization. ” AOLF is “dedicated to teaching the wellness and spiritual lessons of Shankar” by offering courses on meditation, yoga, and specialty rhythmic breathing techniques.

The two Doe Defendants, allegedly known pseudonymously by their blog names “Skywalker” and “Klim,” are alleged former AOLF teachers who have been critical of AOLF’s treatment of members, financial management, and the effects of AOLF teachings on its participants. Both Skywalker and Klim allegedly created their own individual blogs to provide a critical perspective on AOLF and Shankar.

On June 1, 2010, Skywalker allegedly began posting AOLF materials on his blog. These materials allegedly included notes about AOLF’s proprietary breathing techniques, training methods, and audio recordings of meditation chants. Around August 25, 2010, an India-based charity founded by Shankar sent a takedown notice to WordPress – the host of Skywalker’s blog –under the Digital Millennium Copyright Act. WordPress notified Skywalker of the takedown notice, who shortly thereafter removed AOLF’s materials from his blog. The court noted that AOLF itself did not discover that its materials had been posted on Skywalker’s blog until late August 2010, after Skywalker had already removed the materials pursuant to the aforementioned takedown notice.

AOLF subsequently brought action against Skywalker and Klim for, inter alia, trade secret misappropriation. Skywalker and Klim moved to strike the trade secret misappropriation claim under California’s anti-SLAPP statute (Cal. Civ. Code Proc. § 425.16). The anti-SLAPP statute protects individuals from litigation that is strategically brought to discourage public participation or punish the exercise of one’s constitutional right to free speech.

To be successful, a special motion to strike brought under California’s anti-SLAPP statute must pass muster under a two-step analysis: (1) the defendant must show that the plaintiff’s reason for bringing suit “arises from an act by the defendant in furtherance of the defendant’s right of petition or free speech in connection with a public issue,” and (2) the plaintiff must then establish a probability that the claim will prevail. Determining that Skywalker’s publication of the documents in question was a public issue directly connected to his criticisms of AOLF, the court found that the Defendants had made a prima facie showing that AOLF’s suit arose from a protected act.

The burden then shifted to AOLF to show a “probability of prevailing” on its trade secret misappropriation claim. The court noted, however, that this showing involves a relatively low threshold for proving a triable claim. (See Mindys Cosmetics, Inc. v. Dakar, 611 F.3d 590 (9th Cir. 2010)). Skywalker and Klim contended that AOLF could not meet its burden because the information and techniques related to breathing techniques and other kinds of meditation information posted online were public knowledge, and thus, not trade secrets. Meanwhile, AOLF argued – and the court agreed – that the training guides contain additional unique information related to teaching methods and instruction that were not public knowledge, and could qualify as a trade secret.

To further meet the “minimal merit” of a trade secret claim necessary to overcome the anti-SLAPP motion, AOLF had to make a showing that the information contained in the allegedly protected documents is “sufficiently valuable and secret to afford an actual or potential economic advantage over others” and that it had made a reasonable effort to keep the information secret. Financial reports submitted by Plaintiff showing that it generated revenue from the courses and lessons contained in the confidential teaching manuals were enough to convince the court that the documents had significant economic value. In declarations made to the court, AOLF stated that it keeps these documents on password-protected computers in password protected files, and that it requires both instructors as well as students to sign non-disclosure agreements upon enrollment. Defendants argue that the nondisclosure agreement at the bottom of AOLF’s course registration forms was not sufficiently conspicuous, and that Plaintiff had failed to produce evidence of similar nondisclosure agreements by the other 140 AOLF chapters around the world. However, the court found that “[j]ust because there is something else that [Plaintiff] could have done does not mean that [its] efforts were unreasonable under the circumstances.” citing Hertz v. Luzenac Grp., 576 F.3d 1103, 1112-13 (10th Cir. 2009). The court found that the UTSA requires “reasonable efforts” to protect a secret, not maximum security. The court reasoned only “in an extreme case can what is a reasonable precaution be determined on a motion for summary judgment, because the answer depends on a balancing of costs and benefits” in a particular commercial context, which involves issues of fact.” Given the evidence of a reasonable effort by Plaintiff to keep the information contained in the teaching manuals secret, in addition to the novel information contained therein, Judge Koh found that AOLF had met the minimal merit of a trade secret claim.

In further defense of their anti-SLAPP motion, Skywalker and Kilm argued that the case should be thrown out due to “excessive entanglement with free exercise” as well as for a lack of misappropriation. The excessive entanglement defense argues that deciding a case of this nature would force the courts to rule on religious doctrine, thereby violating the separation of church and state. Citing Religious Tech. Ctr. v. Netcom On–Line Cmty. Servs., 923 F.Supp. 1231 (N.D.Cal. 1995), Judge Koh disregarded this argument, noting that “there is no authority for excluding any type of information [from trade secret protection] because of its nature’ alone.” In particular, Judge Koh explained that, “it is possible for the Court to adjudicate Plaintiff’s trade secret claim by resort to neutral principles of trade secret law and without excessive entanglement in matters of religious doctrine or practice.”

As for the lack of misappropriation argument, Judge Koh was inclined to agree that in the case of Klim, there was no evidence to support a finding of misappropriation. However, given Skywalker’s admission that he had in fact posted the teaching manuals on his blog, the same could not be said for him. As a result, the court granted in part the anti-SLAPP motion as to Klim, but denied in part the motion as to Skywalker.

On June 12, 2012, the parties held a Settlement Conference and a settlement was reportedly reached. (See settlement details and other information about the case at Citizen Media Law Project’s website). Pursuant to the settlement agreement, Skywalker and Klim published a joint statement informing its blog readers about the settlement and that their blogs would be frozen on June 19, 2012. They noted in their statement that there are no restrictions on the Does to create new blogs, and that no identity had or would be disclosed in relation to this litigation and settlement. In return, AOLF agreed to drop the lawsuit with prejudice and to pay Skywalker and Klim’s attorney’s fees.

No matter the type of business or service offered, it is in the interest of all corporations to vigorously defend its trade secrets by taking the necessary precautionary measures. For example, the fact that AOLF required all participants – both students and teachers – to sign non-disclosure agreements was key evidence to demonstrate AOLF’s “reasonable efforts” to protect its trade secrets and ultimately defeat Skywalker’s anti-SLAPP motion.

This case also reaffirms that information that may be related to religion can be protected as a trade secret. The court recognized that a defendant cannot simply deprive a plaintiff’s information trade secret protection simply by invoking the Free Exercise Clause. Indeed, this would raise other problems other the Free Exercise Clause by depriving religious organizations of protections of civil law that are available to others.

Finally, this case illustrates that information disclosed publicly online for a short period may not necessarily lose its trade secret status. The court did not seem overly concerned that AOLF’s materials had been posted online for several months and viewed by several hundred members of the public before Skywalker received a takedown notice and removed the materials. It is evident though that companies must move promptly to have any protected information removed from the internet once they become aware of it should they want to protect its trade secret status and pursue available remedies against those who have improperly posted it.