6th Circuit Addresses Reasonable Protection of Trade Secrets

In Kendall Holdings, Ltd. v. Eden Cryogenics, LLC, 2013 WL 1363728 (6th Cir. April 5, 2013), the 6th Circuit addressed Ohio’s Uniform Trade Secrets Act (UTSA) and considered whether the plaintiff took reasonable steps to protect its purported trade secrets.

The plaintiff and defendants were in the cryogenics industry. (“Cryogenics” sounds a lot cooler than it probably is; it involves “using engineered products to store and manipulate gasses and liquified gasses kept at extremely low temperatures.” Pun intended.)

Anyway, the three defendants were two of the plaintiff’s former employees and the company they formed and worked for, which competes with the plaintiff in the cryogenics industry. While working for the plaintiff, one of the defendants, Jim Mitchell, maintained a backup set of proprietary electronic and hard-copy shop drawings at his home, with the plaintiff’s permission. When Mitchell stopped working for the plaintiff, it did not ask him to return these drawings. Later, he worked for the defendant cryogenics company and used these shop drawings to develop its product line. The plaintiff sued under the UTSA.

The trial court granted summary judgment in favor of the defendants, concluding that the statute of limitations had run and that the drawings were not trade secrets.

I’m just going to discuss the latter portion of the opinion, in which he 6th Circuit addressed the issue of whether the plaintiff took reasonable efforts to protect the shop drawings, as required under the UTSA. The court noted that the plaintiff took the following precautions:

  • stamped the shop drawings with a legend barring disclosure or transmission to unauthorized parties;
  • entered into an employment contract with Mitchell that contained a confidentiality provision (though Mitchell denied signing the contract); and
  • maintained policies “that attest to the company’s desire to protect confidentiality and safeguard proprietary information.”

The 6th Circuit concluded that these efforts “could conceivably support a judgment in favor of” the plaintiff, and thus reversed. In other words, these protections were sufficient to create a genuine question of material fact regarding whether the plaintiff took reasonable efforts to protect the shop drawings.

This case doesn’t break any new ground. But I do see a key takeaway. Companies should be very wary about permitting employees to store proprietary information at home. When this is absolutely necessary, be sure to have the employees sign an agreement requiring that this information be kept confidential. To the extent possible, keep an inventory of all information stored at the employee’s home. And when the employee leaves the company, make sure he or she returns this information and signs an acknowledgement that he or she no longer has any of the company’s proprietary information.

Here, even though the plaintiff got past summary judgment, I’d bet that it will have a tough time proving its case to a jury, since it allowed Mitchell to store this information and did nothing when he left.

2 responses

  1. Pingback: Trade Secret | Noncompete – Issues and Cases in the News – April 2013 Update | Fair Competition Law

  2. Pingback: Thursday Wrap-Up (April 18, 2013): Noteworthy Trade Secret, Non-Compete and Cybersecurity News from the Web | The Trade Secret Litigator

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