Category Archives: Case Summary

Trade Secrets and the First Amendment

February 20, 2014 By in Advice, Case Summary, Trade secrets, Trade Secrets In the News Tags: , , , , , , , , 2 Comments

Before this week, I had never thought much about trade-secrets issues intersecting with the First Amendment. But then I read the complaint in a lawsuit filed by hedge fund Greenlight Capital Inc. against the owner of a website called seekingalpha.com, which published a post disclosing Greenlight’s then-confidential investment strategy. The suit seeks to compel the website owner to disclose the writer’s identity so that Greenlight can sue for trade-secret misappropriation. A copy of the complaint is linked below.

Greenlight Capital, led by David Einhorn, is a hedge fund whose “activity in the investment markets is well known and closely watched by other traders and investment advisors.” In the complaint, Greenlight describes how it develops its investment strategies “at considerable expense,” and how it must keep this information confidential, since disclosure of its investment strategies could move the market.

In November 2013, Greenlight was building an equity position in Micron Technologies. This information was not public knowledge. On November 14, 2013, a writer on the seekingalpha.com website, writing under a pseudonym, disclosed Greenlight’s intentions regarding Micron. As a result, Micron’s share prices rose immediately. Greenlight now needs the writer’s identity, so that it can sue him or her for misappropriating trade secrets.

In a New York Times article discussing this lawsuit, high-profile First Amendment lawyer Floyd Abrams offered thoughts on how the suit implicated constitutional issues:

Floyd Abrams, a First Amendment lawyer with Cahill Gordon & Reindel, said there might be reasons for a judge to compel an anonymous blogger to be identified in a libel case. But he said there weren’t many good reasons for doing so in what would appear to be a largely commercial dispute. “There is a serious First Amendment issue here,” Mr. Abrams said. “He will have a pretty tough job persuading a judge.”

While Floyd Abrams has forgotten more about the First Amendment than I’ve ever known, his position strikes me as off point. Laws prohibiting trade-secret misappropriation by definition restrict speech. Essentially, the Uniform Trade Secrets Act* recognizes that, for example, if you obtain a trade secret you know was acquired by improper means, you are not permitted to disclose that information. Allowing someone to hide behind an online pseudonym could render these laws ineffective.

There are other interesting issues in this case. For example, Greenlight says it takes the following measures to protect this confidential information:

Greenlight’s employees are required pursuant to both firm policy and their employment agreements to keep information regarding Greenlight’s non-public investment strategies confidential. In addition, Greenlight’s prime brokers and custodians are required by confidentiality agreements and other duties to Greenlight to keep non-public information concerning Greenlight’s securities positions confidential.

Later, it notes that at the time seekingalpha.com published the post, “the only persons who lawfully possessed information regarding Greenlight’s position in Micron were persons with a contractual, fiduciary, or other duty to maintain the confidentiality of Greenlight’s position: Greenlight’s employees, counsel, prime and executing brokers and other agents.”

It’s not possible to tell from the complaint whether all of Greenlight’s employees, brokers, and agents are required to sign a confidentiality agreement. If not, Greenlight has a major gap in its confidentiality protections that could undermine its misappropriation claims — the defendant could argue that Greenlight did not reasonably protect its proprietary information. As I’ve discussed often before, it is critical to make sure that all employees, vendors, etc. with access to confidential or proprietary information sign agreements that, at a minimum, require them to keep this information confidential.

*Greenlight filed the case in New York, which is one of the few states that has not adopted some form of the UTSA.

Greenlight Complaint

Sixth Circuit Rejects Dubious Trade Secret Claim

January 30, 2014 By in Advice, Case Summary, Trade secrets Tags: , , , , , Leave a comment

If you are thinking about bringing a trade-secret-misappropriation suit, do not take a ready-fire-aim approach. Before filing the lawsuit, you need to be able to articulate the precise trade secret at issue and how it was misappropriated. A recent case decided by the Sixth Circuit, Dice Corp. v. Bold Tech., 2014 WL 260094 (6th Cir. Jan. 24, 2014) gives an example of a trade-secrets claim that probably never should have been filed. A link to the opinion is below.

This case involved a dispute between two competitors who provide services and software to alarm companies. An alarm company using the plaintiff’s software decided to change to the defendant’s. In this circumstance, there needs to be a transition period, during which the alarm company is still using the plaintiff’s software, while running the defendant’s software in parallel on other servers. This ensures that the new software is properly monitoring the alarm signals before it goes live.

The plaintiff, perhaps angry over the loss of a client, accused the defendant of accessing and using its proprietary information during the transition process. It brought claims under the Michigan Uniform Trade Secrets Act, among others.

The trade-secrets claim was based on supposed misappropriation of (1) a file containing a master list of alarm codes, and (2) “receiver drivers” software that takes incoming signals and converts the data to the plaintiff’s standard. The Sixth Circuit rejected both. As to the list of codes, the court said:

The plaintiff fails to explain how this information, even if uniquely coded, is a trade secret. The [file] is a compilation of labeling codes created by manufacturers, not the plaintiff. The codes were collected by the plaintiff’s customers, not the Plaintiff. The plaintiff has not put forward an explanation of how the value of its unique labeling is derived from it not being readily ascertainable by proper means.

Regarding the software, the Sixth Circuit noted that “neither in the operative complaint nor in the plaintiff’s response to the defendant’s motion for summary judgment can we find a trade secret claim based on receiver drivers or software that performs that function.” Even if the plaintiff had properly pleaded a claim on this basis, the court still would reject it since “other than a generalized explanation of what the receiver drivers do, the plaintiff has failed to explain whether the receiver drivers derive economic value from their secrecy.”

Takeaway: This seems like the latest in a long line of trade-secrets cases that never should have been brought in the first place. Filing a lawsuit and litigating it through appeal is not cheap. Before doing so, make sure you can (1) explain what trade secret(s) were actually misappropriated, and (2) plead and prove the misappropraition (or at least feel comfortable that discovery is likely to lead to the evidence necessary to prove your claim). If you have difficulty doing either, think very carefully whether the suit should be filed. As the (overused) saying goes, sometimes discretion is the better part of valor.

Dice Corp. v. Bold Tech.

Discovery: Keeping Trade Secrets Secret

January 20, 2014 By in Case Summary, Customer Lists, Trade secrets, Uncategorized Tags: , , , , , 1 Comment

All litigators need to be familiar with trade-secrets law, since discovery requests often seek  proprietary information. When this happens, you need to protect your clients’ trade secrets in the discovery process. Last week, Florida’s Second District Court of Appeal addressed this issue in Bright House Networks, LLC v. Cassidy, 2014 WL 84237 (Fla. 2d DCA Jan. 10 2014) (opinion linked below). This case offers multiple takeaways for lawyers when your clients are faced with discovery requests calling for production of trade secrets.

In this case, the plaintiffs had a contract with their cable company that entitled them to perpetual free cable. After the defendant, Bright House Networks, purchased the cable company, it terminated the plaintiffs’  free services. The plaintiffs sued Bright House and won — a court ruled that they were entitled to lifetime free cable. In response, Bright House started issuing 1099s to the the plaintiffs for the free cable’s value. (Aside: cable companies are the worst.) The plaintiffs sued again, arguing that the 1099s violated the previous judgment, and that Bright House does not issue 1099s to other customers receiving free services.

In discovery, the plaintiffs sought information about all customers receiving free services. Bright House objected, arguing that this information was confidential and proprietary. The lower court overruled this objection, leading to this appeal.

The appellate court reversed, noting that

The Florida Evidence Code contains a privilege against the disclosure of trade secrets. . . . When a party objects to the disclosure of a trade secret, first a court must determine whether the requested information is, in fact, a trade secret. . . . Usually this determination requires the trial court to perform an in camera review of the information. . . . Second, if the trial court determines that the information is a trade secret, then the court must determine if the party requesting the information has shown a reasonable necessity for the information. . . . If the court orders disclosure, it must make findings to support its determination. . . . [T]he trial court may need to order safeguards to prevent the unnecessary dissemination of the information.

Here, the trial court never made an in camera review. The appellate court ordered the trial court to conduct this review and, if necessary, conduct a hearing to determine whether Bright House’s customer information is a trade secret.

There are several takeaways from this case. Carefully review all discovery requests to determine whether they call for the production of proprietary information. If so, timely object and be prepared to have the court review the material in camera.

If the court orders production, the company should avail itself of an immediate appeal if possible. In Florida, that is done through a petition for writ of certiorari, which allows interlocutory review of orders compelling discovery where compliance could cause irreparable harm.

Also, here Bright House conceded that it had offered free services to other customers but had not issued 1099s. In this opinion, the appellate court noted that “In determining necessity for the information, the trial court should consider the significance of Bright House’s stipulation.” Bright House knew what the information sought would show, and tried to prevent disclosure by conceding the point. This may prove successful. When faced with the possibility of producing trade secrets, you should balance the risk of disclosure with the effect a concession of the relevant point will have on the litigation.

Bright House Networks LLV v. Cassidy

Dealing With Bankruptcy After a Trade-Secrets Judgment

October 9, 2013 By in Advice, Case Summary, Trade secrets Tags: , , Leave a comment

What happens if you obtain a judgment for misappropriation of trade secrets, and the defendant files for bankruptcy? A recent case from the E.D. Va. bankruptcy court could offer some assistance, as it held that judgments for willful and malicious misappropriation are not dischargeable in bankruptcy.

In re: Erika Brooke Harton, 2013 WL 5461832 (Bankr. E.D. Va. Oct. 1. 2013) (linked below) has a particularly egregious story of trade-secret misappropriation. While still working at the plaintiff’s med-spa/salon, the defendant/debtor opened her own competing salon. After the plaintiff’s salon had closed for the day, the debtor entered the salon, accessed the plaintiff’s computer, and printed out the plaintiff’s client’s appointment schedule for the next three months. The debtor also looked up and copied all of the plaintiff’s clients’ contact information.

The debtor then mailed over 2,000 postcards to the plaintiff’s clients that said “We’ve moved—same faces—new location,” and directed them to the debtor’s business. Many of the clients changed their appointments to the debtor’s salon.

Not surprisingly, the plaintiff sued in Virginia state court and obtained a judgment for misappropriation of trade secrets under the Virginia Trade Secrets Act. The court concluded that the defendant’s misappropriation was willful and malicious. After that, the debtor filed for Chapter 13 bankruptcy relief.

In the bankruptcy court, the plaintiff filed an adversary proceeding claiming that the judgment was nondischargeable under 11 U.S.C. 523(a)(4). This statute provides that debts based on, among other things, embezzlement or larceny are not dischargeable.

The bankruptcy court first determined that the debtor was collaterally estopped from relitigating the state court’s finding that her misappropriation was willful and malicious. The bankruptcy court then found that willful and malicious misappropriation falls under Section 523(a)(4), noting that it involves taking another’s property for one’s benefit.

Takeaway: There is always a risk that a judgment debtor will file for bankruptcy protection. In a trade-secrets action seeking damages, try to argue and establish (when possible) that the defendant’s misappropriation was willful and malicious. Armed with such a finding, a judgment creditor can argue that its judgment cannot be discharged in bankruptcy.

In re Erika Brooke Harton, Memorandum Opinion

N.D. Ohio Discusses Damages in Trade-Secrets Lawsuits

October 2, 2013 By in Case Summary, Trade secrets Tags: , , , Leave a comment

The Northern District of Ohio recently discussed the various types of damages that can be obtained in Trade Secret Act (TSA) cases. It concluded that a plaintiff can recover for the money it spent acquiring the trade secret, but cannot recover for lost investment due to the ongoing trade-secret litigation.

In Mar Oil Co. v. Korpan, 2013 WL 5406078 (N.D. Oh. Sept 4, 2013) (link below), the plaintiff, MAR Oil Co., and defendant Korpan entered into an agreement under which Korpan would assist in MAR’s exploration for oil and gas reserves. During the agreement’s term, MAR Oil invested millions of dollars in exploration, including producing seismic readings. These readings are apparently very valuable, as they help in locating oil and gas reserves. Korpan had access to this information.

After the agreement expired, Korpan began working with the other defendants to locate oil and gas reserves in the same area, including on property where MAR Oil previously had a lease. MAR Oil sued, alleging that Korpan and the other defendants used its trade secrets, including the seismic readings.

MAR had three damages theories: (1) lost profits, (2) its acquisition costs for the readings, and (3) lost investment. There was no dispute that lost profits can be a measure of trade-secret-misappropriation damages. But the defendants argued that MAR could not recover for acquisition costs and lost investments.

The court started by discussing the damages available in misappropriation cases (citations and quotations omitted):

Ohio law [and the Uniform Trade Secrets Act] treats actual loss and unjust enrichment caused by misappropriation as two distinct theories of recovery. Each requires plaintiff to prove with reasonable certainty that it suffered a loss because of the defendant’s misappropriation. . . . [D]amages in trade secrets cases are difficult to calculate because the offending company has mixed the profits and savings from increased quality and quantity of products, as well as savings from reduced research costs, with its own natural profits.

The court then ruled that MAR can recover the money it spent acquiring the seismic data, since “if [the defendant] used MAR’s seismic data improperly, what MAR spent and [the defendant] thereby saved would appear to be a proper yardstick for a damage award.” Essentially, the defendant was unjustly enriched by the amount it would have cost to acquire the data.

As for lost investment, MAR argued that a potential investor withdrew an investment due to the ongoing litigation. The court would not allow MAR to seek damages for this lost investment, since “there must be a demonstrable link between misappropriation of the trade secret and MAR’s loss.”

As the court noted, calculating damages in misappropriation cases can be tricky. Plaintiffs need to start thinking about their damage models—and working with a damages expert—early in the case.

MAR Oil Co. v. Korpan — Order

S.C. Supreme Court Addresses Trade Secrets in Discovery

July 25, 2013 By in Case Summary, Trade secrets, Trade Secrets in Discovery 1 Comment

A previous post talked about how trade-secrets issues can come up in lawsuits having nothing to do with trade-secrets claims. Recently, the South Carolina Supreme Court examined when a party is entitled to discovery of its opponent’s trade secrets.

In Meadwestvaco Corp. v. Rayonier Performance Fibers, LLC, 2013 WL 3761622 (S.C. July 15, 2013), the plaintiff and defendant sued each other for breaching a contract. Under this contract, the defendant was to provide the plaintiff with certain materials to use in connection with the plaintiff’s cellulose fiber manufacturing business.

At several depositions of the defendant’s employees, the plaintiff asked for specific details about the defendant’s manufacturing process, including “the ‘recipe’ information for its mill processes.” The defendant’s counsel instructed the deponents not to answer and filed a motion for a protective order, arguing that these details were trade secrets.

The court applied S.C. Rule of Civil Procedure 26(c), which is identical to Federal Rule of Civil Procedure 26(c), and the South Carolina Trade Secrets Act. This analysis required a three-part inquiry: (1) the party opposing discovery must show that the information sought is a trade secret, after which (2) the requesting party must show that the information is relevant and necessary to bring the matter to trial, after which (3) the court must weight the potential harm of disclosure against the need for the information.

Here, the plaintiff did not dispute that the information sought was a trade secret. Thus, the court focused on whether disclosure was necessary, and concluded that it was not. Most importantly, the contract’s terms did not address the recipe behind the defendant’s mill processes, and the plaintiff did not offer any evidence showing that the recipe was necessary for, or even relevant to, its claims. On this latter point, the court took issue with the plaintiff’s failure to offer any expert testimony connecting the defendant’s trade secrets to its claims.

There are takeaways in this case for attorneys seeking and defending the disclosure of trade secrets. When trying to get an opposing party to produce trade-secret information, be sure to clearly explain the connection between the information sought and the claims/defenses in the case. If the information at issue is complicated or technical, consider using expert testimony. On the flip side, attorneys need to be aware of their clients’ trade secrets so that they can properly object to discovery and move for a protective order.

S.D.N.Y.: Marketing Concepts Are Not Trade Secrets

July 21, 2013 By in Advice, Case Summary, Trade secrets 3 Comments

protecting trade secrets Recently, the Southern District of New York addressed whether marketing concepts can be trade secrets in Sarkissian Mason, Inc. v. Enterprise Holdings, Inc., 2013 WL 3585313 (S.D.N.Y. July 15, 2013).

Here, the plaintiff sued Enterprise (the rental car company) for breaching a nondisclosure agreement and misappropriating trade secrets. It alleged that it brought a proprietary business proposal to Enterprise that Enterprise then adopted for its own use.

After someone’s car is totaled, they often need a rental car for a while. A study showed that these people are more likely to buy the rental car, since they are effectively getting an extended test drive. Based on this study, Enterprise asked the plaintiff to develop a plan that makes it easy for renters to purchase their rental cars. They entered into a nondiscosure agreement and engaged in extended negotiations regarding the plaintiff’s plan.

In a nutshell, the plaintiff’s proposal involved placing a code on the rental car’s key fob. If the renter entered the code on the plaintiff’s website, the renter would get information about the car. The plaintiff would then forward the renter’s information to a car dealer, who could try to sell the car to the renter.

The plaintiff and Enterprise could not agree on the precise details for rolling out this program. The plaintiff wanted the renter to be directed solely to the plaintiff’s website, while Enterprise wanted to give auto manufacutrers the choice of using the plaintiff’s website or having the renters directed to the manufacturer’s website. This disagreement proved insurmountable, and Enterprise did not implement the plaintiff’s proposal.

Instead, Enterprise launched its own service, which allowed the renter to go directly to the manufacturer’s website. This case followed.

The court granted summary judgment in favor of Enterprise. Essentially, the court concluded that the plaintiff’s “proposal never progressed beyond a marketing concept, which was easily replicated.” The court focused on the public availability of the ideas behind the plaintiff’s proposal. And it cited to cases that differed between marketing concepts and the technical means for implementing those concepts. Here, the plaintiff solely came up with a concept based on publicly available information. It never developed any unique technology or processes to implement this concept. Thus, it could not establish the existence of a trade secret.

Since the marketing plan was not a trade secret, the plaintiff could only prevail if Enterprise breached the parties’ contract. But even though the plaintiff and Enterprise entered into a nondisclosure agreement, that agreement exempted publicly available information. Thus, the court rejected the breach of contract claim, again relying on the public availability of the information behind the plaintiff’s proposal.

This case shows that plaintiffs will have difficulty proving that marketing plans or concepts are trade secrets. A company offering such services needs to have its business partners execute nondisclosure agreements that specifically prohibit disclosure or use of the plan.

Can Confidential Info That’s Not a Trade Secret Be Misappropriated?

July 3, 2013 By in Case Summary, Trade secrets 7 Comments

In a previous post, I discussed the Uniform Trade Secret Act’s (UTSA) preemption provision. Essentially, the UTSA and the parties’ contracts are the only mechanisms for remedying trade-secret misappropriation, as all other claims are preempted.

A recent District of Arizona case—Food Services of America, Inc. v. Carrington, 2013 WL 3199691 (D. Ariz. June 24, 2013)—discussed a related issue: Is there a common-law claim for misappropriating confidential information that does not rise to the level of a trade secret?

Here, a food-services company sued its former employees, who allegedly misappropriated confidential information “and now work in positions where they could use that information to their new employers’ competitive advantage.” The plaintiff brought claims for violating the UTSA, the Computer Fraud and Abuse Act, and Arizona’s Anti-Racketeering Statute, along with claims for breach of fiduciary duty, conversion, and unjust enrichment.

The court dismissed the racketeering, fiduciary duty, conversion, and unjust enrichment claims as preempted by the UTSA. While the primary issue in this case involved whether the UTSA violates the Arizona Constitution’s anti-abrogation clause*, the plaintiff also raised a novel argument: The UTSA does not preempt common-law claims for misappropriating confidential information that does not qualify as a trade secret, and thus its common-law claims should survive.

The court rejected this argument. It looked to Arizona law and that of other states and concluded that the common law only protected information that qualified as a trade secret. Essentially, if the information is not a trade secret under the UTSA, there is no action for misappropriation.

Certainly, companies have confidential information that may not qualify as a trade secret. For example, a company may have highly confidential information about its customers, such as their social security numbers. If this information is improperly disclosed or used, the results could be devastating. But companies likely cannot rely on either the UTSA or other common-law causes of action to seek relief. Instead, they should require that employees with access to this information sign a nondisclosure agreement. That way, any misappropriation can be the subject of a breach-of-contract action.

*The anti-abrogation clause provides that “the right of action to recover damages for injuries shall never be abrogated, and the amount recovered shall not be subject to any statutory limitation.”

Computer Fraud and Abuse Act Applied Narrowly In AMD Case

June 12, 2013 By in Case Summary, Computer Fraud and Abuse Act, Trade secrets 2 Comments

In Advanced Micro Devices, Inc. v. Feldstein, currently pending in the District of Massachusetts, AMD brought claims against former employees who copied large volumes of confidential files before leaving to work for a competitor. The court previously entered an injunction against the defendants. For a good discussion of the case background and the injunction order, see John Marsh’s post on his Trade Secrets Litigator Blog.

AMD’s complaint included a claim for violating the Computer Fraud and Abuse Act (CFAA), 18 U.S.C. § 1030, among others. On June 10, the court entered an order on the defendants’ motion to dismiss.

This is the first time I’ve addressed the CFAA on this blog. The CFAA bars, among other things, “intentionally access[ing] a computer without authorization or exceed[ing] authorized access and thereby obtain[ing] . . . information from any protected computer,” and

knowingly and with intent to defraud, access[ing] a protected computer without authorization, or exceed[ing] authorized access, and by means of such conduct further[ing] the intended fraud and obtain[ing] anything of value, unless the object of the fraud and the thing obtained consists only of the use of the computer and the value of such use is not more than $5,000 in any 1-year period.

Courts have adopted two different interpretations of the CFAA. The AMD court does a good job describing these two interpretations, one broad and the other narrow. In a nutshell, under the broad interpretation, an employee violates the CFAA by using a computer/server/system he is authorized to use in a manner that exceeds his authority. In contrast, under the narrow interpretation, an employee would only violate the CFAA by accessing a computer/server/system he is not authorized to access. 

Here, AMD alleged that the defendants logged in to AMD’s systems with valid credentials, but used the systems to download confidential information in violation of their contractual obligations and duties of loyalty. Thus, it needed the court to adopt the broad interpretation.

The First Circuit has not yet addressed this issue, thus leaving the court to evaluate the two positions. The court applied the narrow interpretation, reasoning that Congress did not intend to supplement state trade-secret misappropriation laws, and that the broad interpretation could convert benign and common conduct like checking personal email at work into a federal crime.

But the court did not dismiss AMD’s CFAA claim. Instead, it noted that this is an unsettled area of law and gave AMD a chance to plead into the narrow standard:

If AMD can plead specific details indicating that some or all of the defendants used fraudulent or deceptive means to obtain confidential AMD information, and/or that they intentionally defeated or circumvented technologically implemented restrictions to obtain confidential AMD information, than the CFAA claims will surpass the Twombly/Iqbal standard.

While I think that the narrow interpretation is more logical and practical, it is hard to reconcile with the “exceeding authorized access” language in the statute. Regardless, bringing a CFAA claim requires a careful analysis of the relevant circuit’s precedent and the facts at issue.

Here is a link to the court’s opinion:

AMD v Feldstein Order on Motion to Dismiss

District of Connecticut Addresses Trade Secret Act Preemption

May 30, 2013 By in Case Summary, Trade secrets 4 Comments

The Uniform Trade Secrets Act preempts tort and other claims providing civil remedies for trade-secret misappropriation. But it does not preempt breach-of-contract claims (whether or not based on misappropriation) or other civil remedies not based on misappropriation. Essentially, the UTSA and the parties’ contracts are the only mechanisms for remedying trade-secret misappropriation.

This preemption issue often becomes tricky, as it’s not easy to determine whether another claim is truly based on misappropriation. In Allstate Ins. Co. v. Sawicki, 2013 WL 2300757 (D. Conn. May 23, 2013), the court dealt with UTSA preemption.

Here, the defendants included individuals who worked for Allstate as exclusive agents and agreed not to disclose Allstate’s confidential information. Allstate alleged that these defendants transferred “an ownership interest or operating authority of their Exclusive Allstate Agencies” to another defendant, who operated a competing insurance agency. Allegedly, the defendant agents also gave the competing agency their login info, which provided unfettered access to Allstate’s confidential databases and servers.

Allstate brought claims for violations of Connecticut’s Uniform Trade Secret Act and Unfair Trade Practices Act, and for civil conspiracy. The defendants moved to dismiss the unfair-practices and conspiracy claims, arguing that they were preempted by the UTSA.

The court denied the motion to dismiss, noting that facts unrelated to the UTSA claim support the unfair-practices and civil conspiracy claims. Specifically, the unfair-practices claim is based on the competitor defendant requiring the agents to provide it with their login info. And the conspiracy claim is based on an agreement to conceal the agents’ relationship with the competitor, and an agreement to cause the agents to breach their exclusive agent agreement.

This case is a good example of how tricky the preemption issue can be. At their core, the trade-practices act and conspiracy claims are based on providing access to Allstate’s proprietary systems and client relationships, yet they still survived a motion to dismiss.

Before bringing other non-contractual claims alongside a UTSA claim, make sure that you can plead—and prove—that those claims are based on conduct independent of  the misappropriation. Here, even though Allstate got past a motion to dismiss, it may have difficulty distinguishing the factual basis for the various claims.

Be particularly careful about unfair-trade-practices claims under state statutes. There is often a willingness to “throw in” such a claim. But think twice before doing so, particularly if the statute at issue provides for prevailing-party attorney’s fees.