Opinion ID: 552347
Heading Depth: 2
Heading Rank: 1

Heading: ICM's Trade Secret.

Text: 11 A plaintiff claiming misappropriation of a trade secret must prove: (1) it possessed a trade secret, and (2) defendant is using that trade secret in breach of an agreement, confidence, or duty, or as a result of discovery by improper means. Rapco Foam, Inc. v. Scientific Applications, Inc., 479 F.Supp. 1027, 1029 (S.D.N.Y.1979); see Hurst v. Hughes Tool Co., 634 F.2d 895, 896 (5th Cir.), cert. denied, 454 U.S. 829, 102 S.Ct. 123, 70 L.Ed.2d 105 (1981); Restatement of Torts Sec. 757 (1939). On this appeal, DTI and the individual defendants do not challenge the district court's determination that any trade secret misappropriation would constitute a breach of confidence. Indeed, such a challenge would have been fruitless given the nondisclosure agreements signed by Newlin and Vafa. However, DTI and the individual defendants contend that the district court erred in finding that the architecture of ICM's system was a protectable trade secret. We disagree. 12 The most comprehensive and influential definition of a trade secret is that set out in Sec. 757, comment b of the Restatement of Torts (1939).... Lehman v. Dow Jones & Co., 783 F.2d 285, 297 (2d Cir.1986) (footnote omitted); accord Aronson v. Quick Point Pencil Co., 440 U.S. 257, 266, 99 S.Ct. 1096, 1101, 59 L.Ed.2d 296 (1979); see FMC Corp. v. Taiwan Tainan Giant Industrial Co., 730 F.2d 61, 63 (2d Cir.1984) (per curiam) (stating that New York follows Restatement of Torts Sec. 757, comment b). That definition, in pertinent part, provides: 13 A trade secret may consist of any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. 14 Restatement of Torts Sec. 757, comment b; see Delta Filter Corp. v. Morin, 108 A.D.2d 991, 992, 485 N.Y.S.2d 143, 144 (3d Dep't 1985); see also Support Sys. Assocs. v. Tavolacci, 135 A.D.2d 704, 706, 522 N.Y.S.2d 604, 606 (2d Dep't 1987). In determining whether a trade secret exists, the New York courts have considered the following factors to be relevant: 15 (1) the extent to which the information is known outside of his business; (2) the extent to which it is known by employees and others involved in his business; (3) the extent of measures taken by him to guard the secrecy of the information; (4) the value of the information to him and to his competitors; (5) the amount of effort or money expended by him in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. 16 Eagle Comtronics, Inc. v. Pico, Inc., 89 A.D.2d 803, 803-04, 453 N.Y.S.2d 470, 472 (4th Dep't 1982) (quoting Restatement of Torts Sec. 757, comment b); see Lehman, 783 F.2d at 298 (secrecy is most important consideration). 17 Applying these factors to the software program at issue in this case, it is evident that ICM retains a protectable trade secret in its product. The manner in which ICM's generic utility programs interact, which is the key to the product's success, is not generally known outside of ICM. Contrary to defendants' suggestion, the non-secret nature of the individual utility programs which comprise ICM's product does not alter this conclusion. [A] trade secret can exist in a combination of characteristics and components, each of which, by itself, is in the public domain, but the unified process, design and operation of which, in unique combination, affords a competitive advantage and is a protectable secret. Imperial Chem. Indus. Ltd. v. National Distillers and Chem. Corp., 342 F.2d 737, 742 (2d Cir.1965); see Q-Co Indus., Inc. v. Hoffman, 625 F.Supp. 608, 617 (S.D.N.Y.1985). As the district court found, the architecture of ICM's product, or the way in which [ICM's] various components fit together as building blocks in order to form the unique whole, Integrated Cash Management, 732 F.Supp. at 374, was secret. See Dickerman Assocs., Inc. v. Tiverton Bottled Gas Co., 594 F.Supp. 30, 35 (D.Mass.1984) ([T]he particular combination of procedures used in plaintiff's [computer] system, and the particular features within the system ... are neither obvious nor easily duplicated. They constitute a trade secret.). 18 Moreover, ICM's combination of programs was not disclosed in ICM's promotional literature, which contains merely a user-oriented description of the advantages of ICM's product. See A.H. Emery Co. v. Marcan Products Corp., 268 F.Supp. 289, 300 (S.D.N.Y.1967), aff'd, 389 F.2d 11 (2d Cir.), cert. denied, 393 U.S. 835, 89 S.Ct. 109, 21 L.Ed.2d 106 (1968). The defendants have not shown that the limited information available in the promotional literature contains sufficient technical detail to constitute disclosure of the product's architecture. The district court's finding that the package as a whole, and the specifications used by ICM to make the parts of that package work together, are not in the public domain, Integrated Cash Management, 732 F.Supp. at 374, was based on extensive expert testimony. 19 The remaining factors to be considered in ascertaining the existence of a trade secret, see Eagle Comtronics, 453 N.Y.S.2d at 472, are also satisfied in this case. ICM has taken measures to protect the secrecy of its product architecture. See Defiance Button Machine Co. v. C & C Metal Products Corp., 759 F.2d 1053, 1063 (2d Cir.), cert. denied, 474 U.S. 844, 106 S.Ct. 131, 88 L.Ed.2d 108 (1985). The doors to the premises were kept locked. Employees, including Newlin and Vafa, were required to sign nondisclosure agreements which provided that [w]hen employment is terminated, the [former employee] agrees not to use, copy or disclose any of ICM's secrets, software products, software tools or any type of information and software which belongs to ICM. The large investment in research and development of ICM's product has not been challenged by the defendants. Finally, the expert testimony reveals that the ICM product's architecture could not be readily duplicated without the secret information acquired by ICM through years of research. The architecture of the ICM system was not readily ascertainable, Defiance Button Machine, 759 F.2d at 1063, other than by the improper disclosure and use by Newlin and Vafa. See Restatement of Torts Sec. 757, comment b. Accordingly, the district court found ICM's winning combination of generic utility programs to be a trade secret, Integrated Cash Management, 732 F.Supp. at 372. On the record before us, these findings are not clearly erroneous and, therefore, will not be disturbed. See Fed.R.Civ.P. 52(a); Defiance Button Machine, 759 F.2d at 1063; Protexol Corp. v. Koppers Co., 229 F.2d 635, 637 (2d Cir.1956); see also 1 Milgrim on Trade Secrets Sec. 2.03, at 2-32 to 2-33 (1984) (Existence of a trade secret is a question of fact for the determination of the trier of fact, secrecy being a basic element.). 20