Case Title: IMED Corp. v. Systems Engineering Assoc.

Citation: 602 So. 2d 344

Docket Number: 1910064

State: alabama

Court: Alabama Supreme Court

Date: 1992-07-10T00:00:00Z

Document:
602 So. 2d 344 (1992)
IMED CORPORATION, et al.
v.
SYSTEMS ENGINEERING ASSOCIATES CORPORATION, et al.
1910064-CER.

Supreme Court of Alabama.
July 10, 1992.
R. Stan Morris of Harris, Evans, Berg, Morris & Rogers, P.C., Birmingham, for appellants.
Michael C. Quillen and William H. Pryor, Jr. of Walston, Stabler, Wells, Anderson & Bains, Birmingham, and Harold F. See, Tuscaloosa, for appellees.
HOUSTON, Justice.
The United States District Court for the Northern District of Alabama certified the following questions of law to us:
(Emphasis in original.) We note that the district court made the following distinction between the first and second questions:
The following pertinent facts were also provided by the district court for our consideration:
(Emphasis in original.)
The parties are at issue over whether Lewis can be held liable for misappropriating a trade secret under either the Alabama Trade Secrets Act, Ala.Code 1975, § 8-27-1 et seq. ("the Act"), or the common law doctrine of trade secrets, which was first recognized in Alabama in Drill Parts & Service Co. v. Joy Manufacturing Co., 439 So. 2d 43 (Ala.1983). The plaintiffs maintain that if it is possible for them to state a claim against Lewis under the Act, then our inquiry need go no further; however, if it is not possible to state a claim under the Act, then, the plaintiffs argue, we must look to the common law to answer these certified questions.
Section 8-27-3 defines "misappropriation" as follows:
(Emphasis added.)
The parties disagree as to what the emphasized language above means. According to the plaintiffs, a person is liable under § 8-27-3 if he obtains information from a third person and then "discloses or uses" that information, knowing, or possessing information from which he should know, at the time of disclosure or use that the information is a trade secret and that it had been misappropriated by the third person. However, Lewis, relying heavily on the comment to § 8-27-3, insists that a person cannot be held liable under § 8-27-3 unless he knew or should have known at the time he learned the information that it had been misappropriated by the third person. We conclude that the plaintiffs correctly interpret the Act.
The fundamental rule of statutory construction is to ascertain and give effect to the intent of the legislature in enacting the statute. Words used in a statute must be given their natural, plain, ordinary, and commonly understood meaning, and where plain language is used a court is bound to interpret that language to mean exactly what it says. If the language of the statute is unambiguous, then there is no room for judicial construction and the clearly expressed intent of the legislature must be given effect. Tuscaloosa County Comm'n v. Deputy Sheriffs' Ass'n of Tuscaloosa County, 589 So. 2d 687 (Ala. 1991).
Section 8-27-3 is not ambiguous. It clearly states that "[a] person who discloses or uses a trade secret of another ... is liable to the other for misappropriation... if ... [t]hat person learned the trade secret from a third person, and knew or should have known that" he was disclosing or using a misappropriated trade secret. It would require a tortured reading of the statute for us to conclude, as Lewis suggests, that a person cannot be held liable unless he knew or should have known at the time he learned the trade secret that it had been misappropriated by the third person. Our conclusion in this regard is consistent with the purpose of the act  to protect individual property rights in trade secrets and, thereby, to foster the development of new products and technology in this state. The Alabama Law Institute's committee on trade secrets law, which drafted the Act, included the following "Preface" in its proposed legislation:
The Act itself is also illustrative of its purpose.[1] The purpose underlying the Act would surely be thwarted if a person, although innocently acquiring a trade secret from a third person, could nonetheless disclose or use that trade secret with impunity after being placed on notice that the trade secret had been misappropriated by the third person. Likewise, our interpretation of the act is consistent with the common law doctrine of trade secrets, which as previously noted, was recognized approximately four years before the effective date of the Act in Drill Parts & Service Co. v. Joy Manufacturing Co., supra. Section 758B, Restatement of Torts (1939), provides:
We further point out that our interpretation of the Act is consistent with § 1 of the Uniform Trade Secrets Act, which provides, in pertinent part, as follows:
We note Lewis's reliance on the comment to § 8-27-3, which states:
However, the comments that follow each section of the Act, which were prepared by the Alabama Law Institute's committee on trade secret law, although perhaps useful in construction, have not been enacted by the legislature and do not necessarily represent legislative intent. See 1987 Alabama Acts, No. 87-669. See, also, Simmons v. Clemco Industries, 368 So. 2d 509 (Ala.1979) (official comment to Ala.Code 1975, § 7-2-607, part of the Uniform Commercial Code, held not controlling in light of the clear language of the statute). Although the comment to § 8-27-3 suggests that the committee did not intend to codify § 758B of the Restatement, the clear language of § 8-27-3 indicates that § 758B was, indeed, incorporated into the Act. The "Preface," as well as the comments to the Act, reveals that the committee, in drafting the Act, drew heavily from both the Restatement and the Uniform Trade Secrets Act. Although it appears at first blush that § 8-27-3 is merely a codification of § 757 of the Restatement, which, admittedly, could not form the basis for a claim against Lewis under the facts presented in this case, a close comparison of the Act with §§ 757 and 758B of the Restatement, and with the Uniform Trade Secrets Act, indicates that there is a substantial difference between the language of the Act and the language utilized in § 757. Section 757 states, in pertinent part, that "[o]ne who discloses or uses another's trade secret ... is liable to the other if ... he learned the secret from a third person with notice of the facts that it was a secret and that the third person discovered it by improper means or that the third person's disclosure of it was otherwise a breach of his duty to the other." (Emphasis added.) The Uniform Trade Secrets Act, in pertinent part, defines "misappropriation" as the "disclosure or use of a trade secret of another ... by a person who ... at the time of disclosure or use, knew or had reason to know that the trade secret had been misappropriated by the third person." (Emphasis added.) Thus, it appears that the Uniform Trade Secrets Act incorporated the principles of § 758B of the Restatement and that the language of the Uniform Trade Secrets Act was incorporated into the Act. Although the comment to § 8-27-3 is troubling[2] and, given the underlying purpose of the Act, causes us to wonder what the *349 committee had in mind, we are bound under well established rules of statutory construction to interpret the language of § 8-27-3 to mean exactly what it says and to give effect to the apparent intent of the legislature. Tuscaloosa County Commission v. Deputy Sheriffs' Association of Tuscaloosa County, supra.
Accordingly, in response to the first two questions, we hold that Lewis can be held liable under § 8-27-3, and we pretermit any discussion as to whether the plaintiffs could also state a claim under the common law.
With regard to the third question, § 8-27-3 imposes liability on a person who, having obtained a trade secret from a third person, discloses or uses the trade secret after receiving sufficient information to put him on notice that the trade secret was misappropriated by the third person. The purpose of the Act, as previously noted, is to protect the work product of those who develop new products and technology. Consequently, we can discern no logical reason for differentiating between defendants based on the source of their knowledge. Therefore, we answer the third question in the negative.
QUESTIONS ANSWERED.
HORNSBY, C.J., and MADDOX, SHORES, ADAMS, STEAGALL, KENNEDY and INGRAM, JJ., concur.
[1]  Section 8-27-2 provides the following definitions:

"As used in this chapter, the following terms shall have the following meanings, respectively, unless the context clearly indicates otherwise:
"(1) TRADE SECRET. A `trade secret' is information that:
"a. Is used or intended for use in a trade or business;
"b. Is included or embodied in a formula, pattern, compilation, computer software, drawing, device, method, technique, or process;
"c. Is not publicly known and is not generally known in the trade or business of the person asserting that it is a trade secret;
"d. Cannot be readily ascertained or derived from publicly available information;
"e. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy; and
"f. Has significant economic value.
"(2) IMPROPER MEANS. `Improper means' are means such as:
"a. Theft;
"b. Bribery;
"c. Misrepresentation;
"d. Inducement of a breach of confidence;
"e. Trespass; or
"f. Other deliberate acts taken for the specific purpose of gaining access to the information of another by means such as electronic, photographic, telescopic or other aids to enhance normal human perception, where the trade secret owner reasonably should be able to expect privacy.
"(3) PERSON. A `person' is a natural person, corporation, business trust, estate, trust, partnership, association, joint venture, government, governmental subdivision or agency, or any other legal or commercial entity."
Section 8-27-4 provides the following remedies for an "actual or threatened" misappropriation:
"The remedies available for actual or threatened misappropriation of a trade secret are:
"(1) To the extent that they are not duplicative:
"a. Such injunctive and other equitable relief as may be appropriate with respect to any actual or threatened misappropriation of a trade secret,
"b. Recovery of any profits and other benefits conferred by the misappropriation that are attributable to the misappropriation ... and
"c. The actual damages suffered as a result of the misappropriation;
"(2) Reasonable attorney's fees to the prevailing party if:
"a. A claim of actual or threatened misappropriation is made or resisted in bad faith.
"b. A motion to terminate an injunction is made or resisted in bad faith, or
"c. Willful and malicious misappropriation exists; and
"(3) Exemplary damages in an amount not to exceed the actual award made under subdivision (1), but not less than $5,000.00, if willful and malicious misappropriation exists."
[2]  We do not understand the following sentence from the comment:

"Unlike Restatement § 758B, proper appropriation without notice of an earlier misappropriation cannot be misappropriation under the statute even if subsequent notice is given."
Section 758B does not impose liability on a person who innocently obtains a trade secret from a third person, discloses or uses it, and then receives notice that the trade secret was misappropriated by the third person, as the committee apparently believed. See, also, T. Long, The Alabama Trade Secrets Act, 18 Cum. L.Rev., 557 (1988). Section 758B imposes liability only if the person discloses or uses the trade secret after receiving notice.