Hertz v. Luzenac Reaffirms Trade Secret Principles

The 10th U. S. Circuit Court of Appeals, in Hertz v. The Luzenac Group, Nos. 06-1324, 06-1358  (10th Cir. Aug. 11, 2009), recently reaffirmed some trade secret basics in a case involving the alleged misappropriation of a proprietary process by two former employees of a manufacturer.  Although the defendant-employees alleged that each of nine separate elements of a proprietary process for Luzenac Group’s production of a form of vinyl silane-treated talc called 604AV were publicly known, the 10th Circuit held that even where separate elements may be publicly known, a trade secret may still be found to exist when a process is considered as a whole.   This is because the manner in which the individual elements are combined — or the exact details of how the Luzenac Group fine tuned a given element — is not something that would necessarily be known, even if aspects of individual elements are the subject of general industry knowledge.  

The Circuit Court also determined that the lower court erred by focusing on the steps that the Luzenac Group failed to take to protect its proprietary process rather than the reasonableness of the protective steps that were taken.   Among other things, Luzenac Group posted signs directing employees to keep the process confidential, had key employees and contractors sign confidentilaity agreements, barred visitors from viewing the production process and marked important documents with confidentiality legends.  The Circuit Court therefore determined that while there might always be additional steps that could have been taken, it does not follow that the measures adopted by Luzenac Group were unreasonable under the circumstances.  

Finally, the Court stated that even if the subject information did not rise to the level of a trade secret, the Luzenac Group was not precluded from pursuing breach of contract claims against the former employees based on the written confidentiality agreements signed by those employees.

Link to Decision:  http://www.ck10.uscourts.gov/opinions/06/06-1324.pdf

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