One aspect of trade secret law that sometimes surprises business competitors is that there is not always a bright line standard as to what constitutes trade secret misappropriation. For example, may I hire a plane to fly over my competitor’s factory in public air space and take pictures to discover the factory design? If a licensee of my competitor is selling my competitor’s product documentation on Ebay, may I conceal my identity and purchase the documentation? May I pay my competitor’s garbage hauler to allow me to rifle through my competitor’s trash to find customer lists or product design information? The answer is not always clear at first glance. Courts that have considered these issues have engaged in analysis of the specific facts of the cases before them, concepts of commercial morality and the reasonableness of the trade secret owner’s precautions against disclosure.
Let’s start with a quick overview of the bright lines that do exist. It is not always improper to learn the trade secrets of a competitor. We do not expect businesses to wear blinders that make them disinterested about how their competitor’s products work. Lawful competition is part of capitalism. For this reason, the Texas Uniform Trade Secrets Act (“TUTSA”) expressly includes independent development, reverse engineering and “any other means that is not improper” in TUTSA’s definition of “proper means” of learning a trade secret. Tex. Civ. Prac. & Rem. Code Ann. 134A.002(4). TUTSA is based on the 1985 Uniform Trade Secrets Act (“UTSA”). The commentary to UTSA elaborates that “proper means” also includes observation of items in public use or display and obtaining a trade secret from published literature. UTSA 1985 Commentary, pp. 5-6.
However, that same commentary also states that “improper means could include otherwise lawful conduct which is improper under the circumstances” and cites as an example a Fifth Circuit opinion applying Texas law, E. I. du Pont de Nemours & Co., Inc. v. Christopher, 431 F.2d 1012 (5th Cir. 1970), cert. den. 400 U.S. 1024 (1970). In Du Pont, the Fifth Circuit held that the defendants committed a theft of trade secrets by hiring a plane to fly over DuPont’s factory while the factory was under construction to discover DuPont’s trade secrets. The court stated that DuPont was not obligated to undertake the “enormous expense” of building a roof over the factory during the construction period. The court also indicated that the defendants’ conduct violated “the standard of morality expected in our commercial relations.”
I spent a year of undergrad reading classical Greek philosophy that tied my brain into knots over debates about what is “moral” or “good.” The lesson was that there is often room for debate.
The cases addressing the grey areas of learning trade secrets typically focus on these factors: (1) the subjectively perceived morality of the defendant’s conduct and (2) whether the plaintiff undertook reasonable precautions to prevent disclosure of its trade secret. Thus, the plaintiff in DuPont was not required to place a roof over a factory under construction (the court deemed that unreasonable) to prevent aerial espionage. Yet, I would not expect a defendant to commit a theft of trade secrets by viewing that same construction on Google Earth.
Finally, if you want to see how two courts have tackled the other questions I asked in the first paragraph above, take a look at these cases:
Fujitsu Limited v. Tellabs Operations, Inc., No. 12-C-3229, 2013 WL 5587086, *5 (N.D. Ill. October 10, 2013) (applying Texas law pre-TUTSA to deny 12(b)(6) motion to dismiss theft of trade secrets claim where defendant allegedly concealed its identity to purchase a competitor’s product and product documentation on Ebay).
CDI International, Inc. v. Marck, No. Civ.A.04-4837, 2005 WL 327536, *2 (E.D. Pa. February 8, 2005) (applying Pennsylvania law addressing “improper means” and denying motion to dismiss theft of trade secret claim based on defendant’s alleged bribery of garbage hauler to gain access to competitor’s garbage in violation of hauler’s contract with plaintiff).
Photograph by Marco Bellucci displayed pursuant to the license located at: