February 6, 2019

Injunctive Relief Denied in Trade Secret Theft Case

Identifying Combination Trade Secrets Require Sufficient Details Describing a Unique Whole
Holland & Knight Trade Secrets Blog
Leonie W. Huang

Chief Judge Frank P. Geraci, of the Western District of New York, recently denied a temporary restraining order and preliminary injunction sought by irth Solutions, LLC (irth Solutions) to protect the "unique combination" trade secret it alleged was misappropriated by its competitor under common law and the Defend Trade Secrets Act (DTSA), irth Solutions, LLC v. Apex Data Solutions & Servs., LLC, 18-CV-6884-FPG, 2019 WL 283831 (W.D.N.Y. Jan. 22, 2019). The Court found that irth Solutions had not sufficiently identified its trade secret—in this case the unique combination of its software program's system, architecture and user interface—and therefore could not show that a temporary restraining order or preliminary injunction was appropriate.

Both irth Solutions and its competitor Apex Data Solutions and Services, LLC d/b/a "DigTix" (DigTix) offer web-based software programs that assist in protecting underground assets from being damaged by nearby excavation work. Asset owners, such as utilities companies, hire contract locators to physically mark the location of the underground asset at an excavation site after receiving a notification called a "dig ticket." irth Solutions and DigTix offer competing software programs used by contract locators to manage and process the dig tickets.

Three of irth Solutions former customers had provided their login credentials to DigTix's owner who logged into the irth Solutions program, DigTrack, multiple times over the course of nine months, copying 550 of the DigTrack files. The specific features and modules claimed to be copied, however, were already publically known and advertised, and could not be considered secret. On the other hand, the DigTrack program as a whole—unlike the advertised features—was not available to the public and customers were required to enter confidentiality and nondisclosure agreements protecting DigTrack.

As discussed in the Opinion, although components of a software program may be publically known, a software program as a whole may be protectable as a trade secret, if there is a unique combination or compilation that is not publically known. Thus, in the case of the DigTrack program, whether there was a protectable trade secret, hinged on irth Solutions being able to sufficiently identify the "unique combination" of DigTrack's system, architecture and user interface.

The Court, however, found that irth Solutions failed in two main ways to describe its unique combination trade secret. First, irth Solutions was focused not on the overall program, but on too few specifics. It needed to detail how the program as a whole worked, including details of the interrelationship of features making the whole, but primarily described the publically known components and detailed only two of over 25 features and 100 reports. Second, irth Solutions did not describe how its whole program or the compilation was unique.

In short, without a somewhat detailed description of the unique combination making up a trade secret whole, it will be very challenging for a court to identify a protectable trade secret. A plaintiff does not have to give every detail, but enough details need to be provided to the court under seal to allow the Court to assess the merits of protecting the alleged trade secret, and to craft a preliminary injunction that gives the defendant notice of what information may not be used or disclosed. In the case of a unique combination trade secret claim, that means both focusing on the whole rather than on the components, and showing how the whole is unique.

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