In an unpublished opinion from earlier this month, the Fourth Circuit Court of Appeals found sufficient evidence presented at the trial court level to support the plaintiff’s claim that its software was a compilation of information protected under Virginia’s Trade Secret Misappropriations Act.  Decision Insights, Inc. v. Sentia Group, Inc., No. 09-2300 (4th Cir. March 15, 2011).
In Decision Insights, the court was presented with the question of whether Decision Insights had presented sufficient evidence at the trial court level to support its claim that its software was a trade secret under Virginia law for the case to go to a jury.  In that case, Decision Insights alleged that it had developed a software called “Dynamic Expected Utility Model” (”EU Model”), which was an analytical tool used to prepare negotiating strategies. The software allegedly applied concepts from a number of disciplines, including mathematics, economics and political science, to predict the outcomes of political or business situations.  Decision Insights alleged that three of the individual defendants, who had been previously affiliated with Decision Insights, created a competing company and in the process developed software “almost identical” to Decision Insights’ EU Model.  Decision Insights alleged that the Defendants’ software “could not achieve results equal to [Decision Insights'] software unless all the parameters, variables, and sequencing associated with the programs are equal.”   Decision Insights alleged that the three individual defendants breached their non-disclosure agreements with Decision Insights and that all of the defendants misappropriated Decision Insights’ trade secrets under Virginia law.

At the trial court level, the defendants challenged the plaintiffs’ trade secret assertions.  The lower court, in ruling on a motion for summary judgment filed by the defendants, found that while the Plaintiff had shown the EU Model was unique, it had “failed to distinguish which aspects of its software, as a compilation, are publicly available or readily ascertainable and which are not.”  The district court granted the defendants’ motion and entered judgment in their favor.

On appeal, the Fourth Circuit reviewed district court’s decision as to the trade secret claim. The Fourth Circuit first noted that the Virginia statute recognizes “compilation of information” as being a trade secret, if not generally known or readily ascertainable by proper means, and specifically, that “computer source code as a compilation can qualify as a trade secret.” The Fourth Circuit then reviewed the evidence presented and concluded that the Plaintiff had presented sufficient evidence to establish the trade secret status of the “software compilation” for a jury to consider.  As observed by the Court:  “Although the EU Model uses certain mathematical formulas that are in the public domain, [Decision Insights] asserted that the combination and implementation of these formulas in [Decision Insights'] source code for the software constitutes a trade secret.”  The Fourth Circuit found sufficient evidence to support this trade secret claim and remanded the case to the District Court for further consideration of other issues, including whether the Plaintiff had met its burden to show that it had taken reasonable measures to protect the alleged trade secret, another element of a trade secret claim.

While interesting in a number of respects, the Fourth Circuit’s opinion reaffirms that “compilations of information,” even when some of that information may be in the public domain, can be a trade secret.  The North Carolina Court of Appeals has similarly found under the North Carolina Trade Secrets Protection Act that a compilation of business information can be a trade secret and protectable.  See Sunbelt Rentals, Inc. v. Head & Engquist Equipment LLC, 174 N.C. App. 49, 620 S.E.2d 222 (N.C. App. 2005). In that case, Sunbelt alleged that the Defendants, through an orchestrated raid of its business, created a competing company by misappropriating Sunbelt’s trade secrets consisting of a “compilation of business information.” Following a bench trial, the North Carolina Business Court entered judgment in Sunbelt’s favor on the trade secret claim, among others, which was affirmed on appeal:  “Defendants argue plaintiff’s ‘compilation of broad generalized categories of ever-changing business information’ does not qualify as a trade secret.  We disagree.”  Id.    

These cases are instructive. Trade secrets are not always the Coca Cola formula.  Trade secrets can include customer lists, pricing data and even compilations of valuable business information, which may be in the public domain in part, but taken as a whole, have value and are unique.  As demonstrated by the Sunbelt and Decision Insights opinions, it is the totality of the information that merits protection under the trade secrets statutes and each case must be evaluated on their facts to see if the elements of the trade secret claim are met.