Trade Secrets - Misappropriation of Trade Secrets

Misappropriation of Trade Secrets

 

 

Illinois Law

 

Wisconsin Law

 

 

 

 

Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 1:17-cv-08716

 

 

REXA brought its claim for misappropriation of trade secrets under the Illinois Trade Secrets Act (“ITSA”), 765 ILL.COMP.STAT.1065/1, et seq. To prevail on such a claim, the plaintiff must demonstrate “that the information at issue was a trade secret, that it was misappropriated and that it was used in the defendant’s business.” Learning Curve Toys, Inc. v. PlayWood Toys, Inc., 342 F.3d 714, 721 (7th Cir. 2003) (citations omitted). The statute defines a trade secret as:

 

Information, including but not limited to, technical or non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, or process ... that: (1) is sufficiently secret to derive economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use; and (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality. 765 ILL.COMP.STAT. 1065/2(d). There is also a specificity requirement inherent in a claim for misappropriation of trade secrets; a plaintiff must show “concrete secrets” rather than “broad areas of technology.” Life Spine, Inc. v. Aegis Spine, Inc., 8 F.4th 531, 540 (7th Cir. 2021) (quoting Composite Marine Propellers, Inc. v. Van Der Woude, 962 F.2d 1263, 1266 (7th Cir. 1992)). As relevant here, misappropriation under the ITSA involves the “disclosure or use of a trade secret of a person without express or implied consent” by another person who, at the time, knew or had reason to know that knowledge of the trade secret was either “acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use” or “derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use.” 765 ILL.COMP.STAT. 1065/2(b). A misappropriation may also occur when a person produces “modified or even new products that are substantially derived from the trade secret of another.” Mangren Rsch. & Dev. Corp. v. Nat’l Chem. Co., 87 F.3d 937, 944 (7th Cir. 1996) (citations omitted).

 

 

Case law requires a high level of specificity when a plaintiff makes a claim for misappropriation of a trade secret. Life Spine, 8 F.4th at 540; Composite Marine, 962 F.2d at 1266. When a plaintiff presents complex or detailed descriptions of methods and processes but fails to isolate the aspects that are unknown to the trade, no trade secret has been identified. IDX Sys. Corp. v. Epic Sys. Corp., 285 F.3d 581, 583–84 (7th Cir. 2002). Our court has emphasized that “a plaintiff must do more than just identify a kind of technology and then invite the court to hunt through the details in search of items meeting the statutory definition.” Id. at 584 (citing Composite Marine, 962 F.2d at 1266). The key task for a plaintiff is to present a specific element, or combination of elements, that is unknown to the trade and was allegedly misappropriated.

 

 

(Fn. 2: Although IDX involved a claim for misappropriation of a trade secret under Wisconsin law, the statute at issue was materially identical to the ITSA, and federal courts have properly cited IDX in applying Illinois trade secret law. See, e.g., NEXT Payment Sols., Inc. v. CLEA Result Consulting, Inc., 2020 WL 2836778, at *10–11 & n.5, 15 (N.D. Ill. May 31, 2020).)

 

 

Applying that framework, we agree with Chester and MEA that REXA has failed to identify a concrete trade secret, as it must, to defeat summary judgment. IDX considered and rejected an argument similar to the one REXA advances. There, the plaintiff alleged that certain aspects of billing software which the defendants had misappropriated qualified as trade secrets. In support, the plaintiff, IDX, submitted “a 43-page description of the methods and processes underlying and the inter-relationships among various features making up IDX’s software package.” Id. at 583. Our court noted that IDX’s “tender of the complete documentation for the software leaves mysterious exactly which pieces of information are the trade secrets.” Id. at 584. Without information sufficient to separate “the trade secrets from the other information that goes into any software package,” the court could not determine “which aspects are known to the trade, and which are not.” Id. Thus, in IDX this court affirmed the district court’s grant of summary judgment to the defendants on the claims for misappropriation of trade secrets. Id. at 584, 587.

 

 

Alleged Misappropriation:

 

REXA alleges that its trade secrets were misappropriated.

 

Recall that to prove misappropriation, REXA must show the “disclosure or use of a trade secret” by Chester and MEA and that they knew the trade secret had been either “acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use” or “derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use.” 765 ILL.COMP.STAT. 1065/2(b).

 

 

(…) Illinois courts “have read the preemptive language in the ITSA to cover claims that are essentially claims of trade secret misappropriation.” Spitz v. Proven Winners N. Am., LLC, 759 F.3d 724, 733 (7th Cir. 2014) (citation omitted). That is, consistent with the law of other jurisdictions, the ITSA forecloses claims “when they rest on the conduct that is said to misappropriate trade secrets.” Hecny Transp., Inc. v. Chu, 430 F.3d 402, 404–05 (7th Cir. 2005) (citations omitted). In Spitz this court held that the plaintiff’s “quasi-contract” theories of unjust enrichment and quantum meruit were preempted by the ITSA because they were essentially claims of trade secret misappropriation. 759 F.3d at 733.

 

 

 

 

(U.S. Court of Appeals for the Seventh Circuit, July 28, 2022, REXA, Inc. v. Mark V. Chester and MEA, Inc., Docket Nos. 20-2953, 20-3213, 21-2033)