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Archived updates for Wednesday, October 03, 2007

Employee Confidentiality Agreement Insufficient to Establish Expectation of Secrecy in Georgia

In Diamond Power Int’l v. Bergemann, Inc., 2007 U.S. Dist. LEXIS 73032 (ND Ga, September 28, 2007), Diamond Power's requirement that its employees sign a general confidentiality agreement upon the commencement of their employment didi not alone demonstrate that its efforts to maintain secrecy were reasonable.

According to the opinion by Judhe Story,
. . . See Equifax Servs., Inc., 453 S.E.2d at 493 (holding that requiring all employees to sign confidentiality agreement alone was not reasonable as a matter of law to maintain secrecy of certain information); AmeriGas Propane, 972 F. Supp. at 701 (same). Thus, the Court must examine Diamond Power's additional efforts to determine whether it had a reasonable expectation of secrecy in its Hardware Book file.

. . . [N]o reasonable trier of fact could determine that Diamond Power exercised reasonable efforts under the circumstances to maintain the secrecy of the Hardware Book file. Notably, Diamond Power has failed to introduce any evidence that it
  1. labeled the file confidential or otherwise communicated the confidentiality
    of the Hardware Book file directly to its employees,
  2. directed its employees to maintain the secrecy of the file (other than
    through a general confidentiality agreement which did not expressly mention the Hardware book file), or
  3. tracked or otherwise regulated the use of its Hardware Book file.

Absent these measures, Diamond Power employees could, and apparently did, retain the Hardware Book file on their own computers indefinitely during the course of their employment. See Bacon, 597 S.E.2d at 443-44 (holding that trial court should have granted motion for judgment as a matter of law where, among other things, evidence showed that employees "were not informed that the information was confidential" and information could be "retained indefinitely" by employees). In the absence of additional measures, Diamond Power's efforts to maintain the secrecy of the Hardware Book file were not reasonable as a matter of law. The Hardware Book file thus is not afforded trade secret protection under the Georgia Trade Secret Act. Accordingly, insofar as Defendants seek judgment as a matter of law on Plaintiff's claim alleging misappropriation of a trade secret based on the Hardware Book file, their motions are GRANTED.

. . . The PI Forms Library, the PI Configurator, and the FWI Configurator, like the Hardware Book file discussed above, were stored on Diamond Power's P-Drive. They were accessible to most Diamond Power employees, were not marked confidential or otherwise use-restricted, and could be, and on some occasions were, possessed indefinitely on remote disks by Diamond Power employees. . . . [T]he Court [also] concludes that Diamond Power has failed to demonstrate that it took reasonable efforts to maintain the secrecy of the PI Library, the FWI Library, and the PI Configurator. The record establishes that Diamond Power provided virtually no guidance to its employees concerning the safe handling of this information, despite its awareness that it was regularly communicated to customers and used at customer sites. Because the information at issue was widely distributed among its employees, and not restricted from exposure to its customers or others, Diamond Power's efforts do not suffice to afford these files trade secret protection.Accordingly, insofar as Defendants seek judgment as a matter of law on Plaintiff's claim alleging misappropriation of a trade secret based on the PI Library, the FWI Library, and the PI Configurator files, their motions are GRANTED.

Having concluded that the Hardware Book file, the PI Library, the FWI Library, and the PI Configurator were not trade secrets as a matter of law, the Court then turned to examine whether a question of fact existed as to Defendants' "misappropriation" of the remaining trade secrets at issue under the Georgia Trade Secret Act, which requires:

(A) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

(B) Disclosure or use of a trade secret of another without express or implied consent by a person who:

(i) Used improper means to acquire knowledge of a trade secret;

(ii) At the time of disclosure or use, knew or had reason to know that knowledge of the trade secret was:

(I) Derived from or through a person who had utilized improper means to acquire it;

(II) Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or

(III) Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or

(iii) Before a material change of position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

The Defendants therefore argued that there was insufficient evidence of use or disclosure of the remaining trade secrets to withstand summary judgment on Plaintiff's other claims. However, the court disagreed:

Viewing the evidence in a light most favorable to Diamond Power, the record reflects that Davidson, immediately after accepting an offer of employment with Bergemann, exploited his position at Diamond Power to disclose sensitive and secretive financial, accounting, and product design information to Bergemann. As to the information concerning the PowerTrain design, a reasonable trier of fact could conclude, based on the sudden revelation by Mr. Schwade to his Bergemann superiors on the day of his October 21 lunch with Davidson, that Davidson disclosed the PowerTrain information to an agent of Bergemann. As to the remaining trade secrets, a reasonable trier of fact could also conclude, based on the evidence that Davidson uploaded the "Diamond Power Info" file to Bergemann's network, that Davidson disclosed the IOS Reports, the BOM Report, the Cost Data Report, and the CMMs to Bergemann. At the time of these disclosures, Davidson knew or had reason to know that these trade secrets were acquired under circumstances which gave rise to a duty to maintain their secrecy or limit their use. 15 See Camp Creek Hosp., 139 F.3d at 1412 (noting that "the GTSA includes the diversion of information acquired under legitimate circumstances within its definition of misappropriation"). Accordingly, a question of fact exists concerning whether Davidson "disclosed" trade secrets in violation of O.C.G.A. § 10-1- 761(2)(B)(i i)(II).

Moreover, Diamond Power has come forth with sufficient evidence to establish that Bergemann "used" Diamond Power's trade secrets at a time when it had reason to know that the trade secrets were "derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use." See O.C.G.A. § 10-1-761(2)(B)(ii)(III). As to the information regarding the PowerTrain, the evidence concerning Mr. Schwade's sudden awareness of its components may lead a fact finder to conclude that Bergemann later "used" that information because it likely would improve Bergemann's own efforts to provide rebuild and repair [*40] services for PowerTrain systems. See Penalty Kick, 318 F.3d at 1292 ("There are no technical limitations on the nature of the conduct that constitutes 'use' of a trade secret . . . . As a general matter, any exploitation of the trade secret that is likely to result in injury to the trade secret owner or enrichment to the defendant is a 'use' . . . . [E]mploying the trade secret in manufacturing or production [and] relying on the trade secret to assist or accelerate research or development . . . all constitute 'use.") (quoting Restatement (Third) of Unfair Competition § 40 cmt. c (1995)). Likewise, the evidence supports a finding that Bergemann acquired the IOS Reports, the BOM Report, the Cost Data Report, the CMMs with reason to know that Davidson was disclosing that information in contempt of his duty to maintain its secrecy. The record reflects, for example, Mr. Payne copied these files and placed them in his own user directory, and has testified that use of such information might "benefit" Bergemann. The coincidental (and convenient) memory loss of several other Bergemann employees concerning whether such information was accessed or used also creates a triable issue concerning the credibility of their denials. A question of fact thus exists concerning whether Bergemann "used" this information by comparing it against Bergemann pricing and other financial data to increase profit margins on the sale of aftermarket parts.

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