Opinion ID: 2371423
Heading Depth: 3
Heading Rank: 1

Heading: Coinco's Trade Secrets

Text: We begin by examining whether the alleged trade secrets in this case qualify as such under the Maryland Uniform Trade Secrets Act (hereinafter MUTSA). LeJeune posits that Coinco failed to make reasonable efforts to protect the secrecy of its information; therefore, according to LeJeune, the documents and information that he retained do not qualify as trade secrets. On the other hand, Coinco alleges that numerous computer files and documents that LeJeune had in his possession were confidential, proprietary items that meet the definition of trade secrets. In particular, Coinco complains that, of the computer files taken by LeJeune, the Executable Budgeting Software and Special Markets Strategic Marketing Plan were trade secrets. Coinco also claims that LeJeune retained trade secrets in hard-copy form, including pricing and cost information, service pricing information, a list of preferred distributors, and specifications of the MC2600 and Bill Pro Validator. Section 11-1201(e) of MUTSA defines the term trade secret to mean: information, including a formula, pattern, compilation, program, device, method, technique, or process that: (1) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. Section 11-1201(e) of MUTSA. Although we have not had occasion to interpret this definition, the Court of Special Appeals has done so in a case where a printing company alleged that its pricing information and marketing strategies qualified for trade secret protection. In Optic Graphics, Inc. v. Agee, 87 Md.App. 770, 591 A.2d 578, cert. denied, 324 Md. 658, 598 A.2d 465 (1991), the court held that the pricing information or market strategies did not meet the statutory definition of a trade secrets. The court observed that [t]here are two types of trade secrets: technological developments and internal operating information. Id. at 784, 591 A.2d at 585. Obviously dealing with internal operating information, the court recognized that, under some circumstances, pricing information and marketing strategies could be considered trade secrets. Id. at 787, 591 A.2d at 586. Nevertheless, the court stressed, information is a trade secret under MUTSA only if two requirements are met: the information must (1) hold `independent economic value' because it is not `generally known' to or readily ascertainable by others who stand to benefit economically if they use or disclose it, and (2) be the subject of reasonable efforts to maintain its secrecy. Id. at 787, 591 A.2d at 587. The Court of Special Appeals agreed with the trial court that the pricing information and marketing strategies failed both requirements. The pricing information had no economic value to the competitor because it was composed of so many variables, generally subject to change, and specific to the printing company. The printing company's efforts to maintain the secrecy of the pricing information also fell short of MUTSA's requirement. Id. at 787-88, 591 A.2d at 587. The marketing strategies also failed the trade secret definition because they, too, were subject to change and, given that they were readily available from the marketplace, had not been reasonably safeguarded. Id. at 788, 591 A.2d at 587. [5] In Diamond v. T. Rowe Price Assocs., 852 F.Supp. 372 (D.Md.1994), Judge Benson E. Legg of the United States District Court for the District of Maryland also determined that certain internal operating information did not qualify for trade secret protection under MUTSA. T. Rowe Price, an investment management firm, sought relief under MUTSA against a manager who had allegedly misappropriated files that she had acquired during her time as an employee. Judge Legg found that almost all of the documents at issue were either outdated (e.g., interoffice memoranda), innocuous (e.g., routine correspondence), or publicly available (e.g., SEC filings such as Form K-1s). Id. at 412. With respect to the other documents, which contained general business matters, the tax withholding status and investment structure of a mutual fund, and an analyst's cursory analysis of a sneaker company, the Judge determined that there is no evidence that they have any independent economic value for anyone other than T. Rowe Price. Id. In Motor City Bagels v. American Bagel Co., 50 F.Supp.2d 460 (D.Md.1999), however, Judge Frederic N. Smalkin found that a company's business plan was a trade secret. Judge Smalkin summarized MUTSA's definition: Stated succinctly, `to be protected under Maryland law, information must be secret, and its value must derive from the secrecy. In addition, the owner of the information must use reasonable efforts to safeguard the confidentiality of the information.' Id. at 478 (quoting Montgomery County Ass'n of Realtors, Inc. v. Realty Photo Master Corp., 878 F.Supp. 804, 814 (D.Md. 1995), aff'd, 91 F.3d 132 (4th Cir.1996) (holding that a realtor association's computer database was not a trade secret because the information contained on it had been distributed widely to its realtor members and potential purchasers)). Although the business plan at issue contained some public information, Judge Smalkin distinguished it from publicly available marketing strategies in Optic Graphics because the business plan included personal insights and analysis brought to bear through diligent research and by marshaling a large volume of information. Id. at 479. Judge Deborah K. Chasanow reached a similar conclusion with regard to the mutual fund customer list at issue in Padco Advisors, Inc. v. Omdahl, 179 F.Supp.2d 600 (D.Md.2002). As a Regional Sales Manager for Padco Advisors, Omdahl was responsible for marketing and selling mutual funds to customers in the western United States. When Omdahl left Padco to work for ProFund, one of Padco's two competitors, Padco sought relief under MUTSA to protect its customer database. Padco's customers were registered individual investment advisors (RIAs), and the database contained information about each RIA's investment strategy, total assets he manages, where the assets are invested, and the type of portfolio management software used. Id. at 604. In denying Omdahl's motion for summary judgment, Judge Chasanow held that certain information on the database was not ascertainable by competitors and that the information had economic value because it could help ProFund develop new products. Id. at 610. Judge Chasanow also concluded that Padco had taken reasonable steps to guard the secrecy of the database by making it available to only 15% of its employees and by protecting the database with passwords and firewalls. Id. Thus, for the purposes of surviving summary judgment, the database met the statutory definition of trade secret. The case before us resembles the situations in Motor City Bagels and Padco. Similar to the companies in those cases that sought to protect collections of valuable data, Coinco had compiled in its Executable Budgeting Software, Specialty Markets Strategic Plan, and hard-copy pricing documents a vast amount of information related to its manufacturing costs and profit margins. Moreover, like the mutual fund market in Padco in which only three companies competed, the currency acceptor industry is highly competitive and dominated by only two companies. Therefore, Coinco's cost and profit information, if available to Mars, could allow Mars to undercut all of Coinco's prices, giving Mars an easy economic advantage. Because of the unique, competitive nature of the currency acceptor industry, the detailed specifications of the MC2600 and Bill Pro Validator also had economic value to Mars. Should Mars learn the technology used in those machines, it could apply that technology to improve the commercial value of its own products. We have identified no evidence suggesting that Mars, without spending a great deal of resources, could obtain all of this information from the marketplace. Indeed, Coinco is a privately held company and does not release its profit information in public filings with the Securities and Exchange Commission. The evidence supports a finding that the information contained in the computer files and hard-copy documents (i.e., the budgeting software, Specialty Markets Strategic Plan, pricing and cost documents, and MC2600 and Bill Pro Validator specifications) [6] had economic value to Mars and was not readily ascertainable. Furthermore, it is apparent from the record that Coinco took reasonable measures to maintain the secrecy of the pricing and cost information, Specialty Markets Strategic Plan, and machine specifications. Because of its tiered pricing scheme, Coinco negotiated non-disclosure agreements with its customers to prevent them from discussing prices with other customers. In addition, Coinco marked confidential on the specifications for the Bill Pro Validator as well as the Specialty Markets Strategic Plan and other pricing documents that LeJeune either burned or kept in hard copy form. In the company's employee handbook, Coinco communicated the secret nature of its manufacturing processes and business methods by requiring employees to protect such information as confidential. In light of these efforts, we hold that the trial court appropriately determined that the specifications of the MC2600 and Bill Pro Validator as well as the pricing and cost data contained on the Specialty Markets Strategic Plan, Executable Budgeting Software, and other hardcopy pricing documents qualify as trade secrets under MUTSA.