A recent federal court decision highlights the need for businesses to maintain the confidentiality of their valuable trade secrets. While many companies rely on non-compete agreements with nondisclosure clauses, that may not be enough. Without internal protocols for maintaining the secrecy of devices, products, or methods, a company may find that there is no legal protection for that information should it end up in the hands of a competitor. A business concerned about protecting its secrets should be proactive in establishing and enforcing safeguards before the secrecy of such information becomes an issue in court.
In Tank Tech, Inc. v. Neal, 2007 WL 2137187 (E.D. Mo. 2007), Tank Tech found out that its efforts to protect its trade secrets were insufficient. Tank Tech is in the business of retrofitting/lining, inspection, and repair of above ground and underground storage tanks used in the petroleum industry. Neal was a Tank Tech foreman who had signed a non-compete agreement that included a requirement that he not share trade secrets without written consent. Neal quit his job and went to work for a competitor. When he left, Neal took numerous photographs of Tank Tech worksites, a jobsite checklist, and a list of items needed and used for all Tank Tech jobsites. Tank Tech sued Neal alleging that Neal had misappropriated its trade secrets, including information about various processes and devices used by Tank Tech at its worksites. Tank Tech sought to enforce its non-compete agreement and enjoin Neal from working for the competitor for a period of five years.
The federal district court refused to issue the requested injunction. The court noted that the employer bears the burden of proving that its purported trade secrets are, in fact, secret. In this case, Tank Tech’s claims were “fatally and inescapably doomed by its own lack of secrecy with respect to all of the designs and developments it has presented.” While Tank Tech had its employees sign non-compete agreements and barricaded its job sites, this was insufficient to meet its burden of demonstrating that its information was actually secret.
The court was very clear that a non-compete agreement does not grant protection when the information itself is not secret. The evidence indicated that all of Tank Tech’s employees were aware of the information, and Tank Tech never told its employees that the information was to be considered a trade secret. Tank Tech had actually sold one of the devices it claimed was secret to another competitor. Tank Tech also demonstrated many of the procedures it claimed were secret at trade shows. Other aspects of Tank Tech’s processes were in plain view at job sites and were not so complicated that the designs and elements could not be readily reproduced by a competitor. The court also noted that there was no evidence indicating that Tank Tech had expended a significant amount of effort or money in developing the information it claimed was secret.
The decision in Tank Tech serves as a reminder to businesses that if you want to keep important information away from your competitors, it is vital to develop plans and protocols that will keep your trade secrets secret.