Opinion ID: 1800234
Heading Depth: 2
Heading Rank: 2

Heading: The claim of misappropriation.

Text: This case may also be viewed from the standpoint of whether there was a misappropriation of a trade secret. This analysis centers on the misappropriation, the gist of which is breach of a confidential relationship, rather than on whether a property interest is involved, i.e., whether a trade secret exists. [6] The protection afforded trade secrets is not intended to reward or promote the development of secret processes (although it does, of course, benefit the enterprising developer), but rather is to protect against breaches of faith and the use of improper methods to obtain information. 1 Milgrim, Trade Secrets § 12.01. Trade secret law seeks to maintain standards of loyalty and trust in the business community. A. These two approaches overlap, since one of the requirements of a misappropriation cause of action is to first prove the existence of a trade secret. Plaintiff must then further prove that defendant acquired the trade secret as a result of a confidential relationship and that the defendant has used and disclosed the trade secret. These three elements are set out in Eutectic Welding Alloys Corp. v. West, 281 Minn. 13, 18, 160 N.W.2d 566, 570 (1968). What needs to be kept in mind, however, is that the various elements should not be artificially separated for purposes of analysis since, in a significant sense, they are interdependent. 1 Milgrim, Trade Secrets § 7.07(1) at 95. Here, Jostens contends that defendants Titus, Henderson and Hoagberg acquired knowledge of Jostens' trade secrets while in its employ, and they then used this information to produce a similar CAD/CAM system for their new employer, defendant NCS. As to Henderson, for example, the claim is that he used his experience gained at Jostens to train personnel at Balfour in the operation of the CAD/CAM system sold it by NCS. As to Titus, the claim is that he took his knowledge, experience and skills to NCS and used them to build a similar system for NCS. Defendants' defense to the claim of misappropriation was that there were no trade secrets, nothing to misappropriate, and in this connection that (1) NCS developed its system using only generally known computer concepts which are not protectable, and (2) if any of the concepts might be protectable, the protection was lost by Jostens' failure to take reasonable precautions against disclosure and use, and (3) the defendants developed their product independently from other sources. B. First of all, even without the employment agreements signed by Titus and Henderson, employees have a commonlaw duty not to wrongfully use confidential information or trade secrets obtained from an employer. We do not find this commonlaw duty to have been breached. 1. Titus took with him (how could he not?) his experience and skills acquired while working for Jostens. [7] These abilities, to the extent derived from generally known sources, are not considered confidential; a computer programmer, like a real estate salesperson, should be able to ply his trade. Jim W. Miller Construction, Inc. v. Schaefer, 298 N.W.2d 455, 459 (Minn. 1980). But knowledge gained at an employer's expense, which takes on the characteristics of a trade secret and which would be unfair for the employee to use elsewhere, is deemed confidential and is not to be disclosed or used. Cherne Industrial, Inc. v. Grounds & Associates, Inc., 278 N.W.2d 81 (Minn.1979). Even if this knowledge is only in the employee's memory, it may be protectable. Cybertek Computer Products, Inc. v. Whitfield, 203 U.S.P.Q. 1020 (1977). Confidential information is that which an employee knew or should have known was confidential. Structural Dynamics Research Corp. v. Engineering Mechanics Research Corp., 401 F.Supp. 1102 (E.D.Mich. 1975). Or as Minn.Stat. § 325C.01, subd. 3(ii)(B)(II) (1980), now puts it, a person, such as an employee here, is not to disclose or use a trade secret that he knows or has reason to know was acquired by him under circumstances giving rise to a duty to maintain its secrecy or limit its use. On the other hand, the employee is entitled to fair notice of the confidential nature of the relationship and what material is to be kept confidential. Ellis, Trade Secrets 79 (1953). 2. Jostens' failure to take reasonable precautions to protect the confidentiality of what it now claims to be secret was such that the defendant employees could not be expected to have known what was confidential and what was not, what was unfair to disclose and what was not. The trial court found, and there is evidence to support the finding, that Jostens did not really know what it was about its Burnsville system that it intended to protect. Perhaps this difficulty existed because of all people at Jostens Titus, the person against whom protection is now sought, was the most knowledgeable about what information should be protected. It appears Titus was not unaware of his position. Titus recognized Jostens' proprietary interest in his project. Thus he sought and obtained his employer's permission to disclose aspects of the CAD/CAM to the trade in his seminar presentation and journal article. Still, it can hardly be said that Jostens had an understanding with Titus not to disclose any particular information when, in lieu of any exit interview, Jostens' president, on Titus' departure, said the company wanted Titus to go ahead and work in the area of CAD/CAM development and this was fine with us. Thus the trial court was not in error in finding that at the time Titus left Jostens his knowledge of the operation of the Burnsville system was part of his own general skill and experience. If some of Titus' knowledge might nevertheless be a likely subject for a trade secret, here, we think, Jostens failed to make it so by failing to insist on its secrecy. This is true also for the other defendant employees. 3. A misappropriation claim also requires proof under Eutectic that the defendants disclosed or used the trade secret. Much evidence was received on this issue. Jostens tried to show that the application software package used in the NCS graphics subsystem contained significant parts of the same software package in Jostens' system. Jostens showed, for example, through a comparison study made by two of its experts, that some 29 names of routines were identical and, within routines bearing the same names, a high percentage of the lines were syntactically identical. [8] Jostens showed that copies of some of the source code furnished NCS by Adage were labeled Jostens Application Software. On the other hand, Adage's programmer testified that only a small percentage of NCS' software routines, at most 10%, had been written from Jostens' package and that while a somewhat higher percentage had begun as routines for the Jostens package, they were substantially revised before being used in the NCS package. Then, too, some of the so-called Jostens routines were identical as standard utility routines, kept in Adage's library and used as building blocks as needed. The fact that only a small percentage of Jostens' routines may have been used does not especially help the defendants; it may take only that small percentage, depending on what it entails, to make a program unique. Nevertheless, Jostens did not convince the trial court that NCS' system itself evidenced use of any of Jostens' alleged trade secrets. The court made extensive findings of specific ways in which the NCS system had functional capabilities totally nonexistent in or substantially different from Jostens' software package. There was testimony by an Adage programmer that at the time the technical cooperation agreement was still a possibility, he had already determined that NCS' proposed program would require such enormous modification of Jostens' package that Adage could as well start all over anyway. In light of such evidence, we cannot say that the trial court's findings that Jostens failed to prove disclosure or use of its claimed trade secret were clearly erroneous. C. A confidence may be imposed contractually as well as by employment status, so Jostens also asserts a separate claim that defendants Titus and Henderson are liable for breach of their employment agreements. The trial court found the agreements unenforceable on the grounds neither was supported by consideration. We agree.
All papers and apparatus relating to Jostens' business, including those prepared or made by me, shall be the property of Jostens and except as required by my work, I will not reveal them to others nor will I reveal any information concerning Jostens' business including its inventions, shop practices, processes and methods of manufacturing and merchandising. There was no evidence that, by signing this agreement, either Titus or Henderson gained greater wages or a promotion or access to technical or operational parts of the Burnsville system that nonsigning employees did not have. According to Titus, he and the others asked to sign the agreement did so under the impression that they would lose their jobs if they did not. Jostens argues that the promise of future or continued employment is adequate consideration. 2. We have held that the adequacy of consideration for a noncompetition contract in an ongoing employment relationship depends on the particular facts of each case. Davies & Davies Agency, Inc. v. Davies, 298 N.W.2d 127 (Minn.1980). In Davies we observed that the contract provided the employee with real advantages. That does not appear to be the case here. The agreements obtained by Jostens did not increase Jostens' commitment to the employees for future benefits, as in Modern Controls, Inc. v. Andreadakis, 578 F.2d 1264 (8th Cir. 1978) (applying Minnesota law). Nor do the agreements memorialize a prior oral agreement made between the employer and prospective employee, as in Cybertek Computer Products, Inc. v. Whitfield, 203 U.S.P.Q. 1020 (1972). Davies contains dicta that [m]ere continuation of employment as consideration could be used to uphold coercive agreements. Id., 298 N.W.2d at 130-31 (emphasis added). In this instance, however, where no raises or promotions resulted, where other employees with similar access were not asked to sign, the mere continuation of employment for Titus and Henderson is not enough. To the extent the agreements encompassed the employees' common-law duty to their employer not to disclose, our disposition of that common-law duty makes any contractual duty moot. Since we find the employment agreements not enforceable, we need not decide the issue of whether their purported reach of all papers and information is overbroad or lacking in fair notice of what is not to be disclosed.