Court Opinion

ID: 2799601
Source: CourtListenerOpinion
Date Created: 2015-05-08 19:03:00.288559+00
Date Added: 2024-06-11T11:31:11.574305
License: Public Domain

Case: 14-14943   Date Filed: 05/08/2015   Page: 1 of 10

                                                        [DO NOT PUBLISH]

           IN THE UNITED STATES COURT OF APPEALS

                  FOR THE ELEVENTH CIRCUIT
                    ________________________

                           No. 14-14943
                       Non-Argument Calendar
                     ________________________

                 D.C. Docket No. 1:11-cv-02061-HLM

WAREHOUSE SOLUTIONS, INC.,

                                            Plaintiff-Counter
                                            Defendant-Appellant,

                                versus

INTEGRATED LOGISTICS, LLC,
Individually,
DAN WOTRING,
Individually,
DAVID IVIE,
Individually,
MICHAEL HEYDEN,
Individually,

                                            Defendants-Counter Claimants-
                                            Appellees.
                Case: 14-14943       Date Filed: 05/08/2015        Page: 2 of 10

                               ________________________

                      Appeal from the United States District Court
                         for the Northern District of Georgia
                            ________________________

                                         (May 8, 2015)

Before TJOFLAT, HULL and WILSON, Circuit Judges.

PER CURIAM:

       Plaintiff-Appellant Warehouse Solutions, Inc. (“WSI”) appeals the district

court’s order granting summary judgment to Defendants-Appellees Integrated

Logistics, LLC and its owners Dan Wotring, David Ivie, and Michael Heyden

(collectively, “ILL”) on WSI’s claim for misappropriation of trade secrets under

the Georgia Trade Secrets Act of 1990 (“GTSA”), O.C.G.A. § 10–1–760 et seq.

After review, we affirm. 1

                                    I. BACKGROUND

A.     The Parties’ Business Relationship

       Plaintiff-Appellant WSI is a logistics business formed in 1996 by Joseph

Lebovich. In 1998, Lebovich developed a software program called Intelligent

Audit. Intelligent Audit is a web-based program that interfaces with UPS and

FedEx tracking systems to allow companies to track their packages and collect

       1
         We review de novo the district court’s grant of summary judgment, viewing all facts in
the light most favorable to the non-moving party. Morales v. Zenith Ins. Co., 714 F.3d 1220,
1226 (11th Cir. 2013). Summary judgment is appropriate only when there exists no genuine
factual dispute and the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a).
                                                2
              Case: 14-14943       Date Filed: 05/08/2015   Page: 3 of 10

funds for late or missing packages. Intelligent Audit generates customer reports,

performs e-bill audits, and allows customers to view real-time data regarding their

packages. Lebovich hired Scott Langley and Langley’s company to help sell the

Intelligent Audit program. Langley received a 20% interest in the software in

return for his services.

      Defendant-Appellee ILL is a logistics company that, like WSI, provides

users with package-tracking software. In 2002, after seeing Langley’s

demonstration of Intelligent Audit, ILL hired Langley and ILL began reselling the

program to its own customers under the name “ShipLink.” For each parcel audited

by the ShipLink program, ILL paid WSI a transaction fee of $.015. WSI and ILL

never executed a written agreement with regard to this resale arrangement or any

other aspect of their business relationship.

      To log into the Intelligent Audit program, a user must enter an authorized

user identification (“ID”) and password. As a reseller of the software, ILL

“actively managed” its customers’ accounts and was authorized to create and give

user IDs and passwords to its customers. Because ILL was the most active user of

the system, it had greater access to the program’s features than other resellers or

end-users, i.e., customers. However, it is undisputed that ILL never had access to

Intelligent Audit’s source code.

                                            3
               Case: 14-14943       Date Filed: 05/08/2015      Page: 4 of 10

       On several occasions, Lebovich told ILL that Intelligent Audit was highly

confidential and proprietary. Lebovich instructed ILL not to share the program

with anyone outside of ILL, with the exception of ILL’s customers who had signed

a contract containing a confidentiality provision that expressly forbade disclosure.

       In 2004, without WSI’s knowledge, ILL hired Platinum Circles

Technologies (“Platinum”) to develop its own web-based tracking program that

was visually and functionally similar to Intelligent Audit. ILL gave Platinum a

user ID and password to log onto the Intelligent Audit program. Like ILL,

however, Platinum never had access to the program’s source code.

       On September 30, 2005, ILL terminated its business relationship with WSI

and began selling the program developed by Platinum under the “ShipLink” name.

B.     District Court Proceedings

       WSI sued ILL for copying the Intelligent Audit software. ILL filed an

answer raising nine counterclaims against WSI, including a counterclaim for

tortious interference with business relations. 2

       On September 25, 2012, WSI filed an amended complaint against ILL

raising various federal and state law claims, including a claim for misappropriation

of trade secrets. WSI alleged that Intelligent Audit was a trade secret that ILL had

       2
          This counterclaim arose from WSI’s alleged refusal to recognize ILL’s ownership
interest in the software, which caused ILL to lose prospective customers.
                                               4
              Case: 14-14943     Date Filed: 05/08/2015    Page: 5 of 10

misappropriated by creating a functionally identical program. The parties cross-

moved for summary judgment.

      As to the misappropriation of trade secrets claim, ILL contended that it only

had access to the program’s visible output, which does not constitute a trade secret,

and, in any event, WSI failed to protect the program’s secrecy. WSI argued that it

took all reasonable means to prevent disclosure of its complicated software

program, including the use of technologically-advanced password protection and

encryption and end-user confidentiality provisions.

      On July 7, 2014, the district court granted ILL summary judgment on all of

WSI’s claims and granted WSI summary judgment on all but one of ILL’s

counterclaims. Only ILL’s counterclaim for tortious interference with business

relations remained.

      In relevant part, the district court found that (1) Intelligent Audit was not a

trade secret within the meaning of the GTSA because the program’s visible output

(i.e., interactive screen displays) was readily apparent to users of the software, and

(2) WSI did not make reasonable efforts to maintain the program’s secrecy.

      In doing so, the district court drew a distinction between a software

program’s underlying source code, which may be a trade secret, and the program’s

“look and feel” and “functionality,” which cannot. Unlike source code, which is

written in a programming language and is not accessible to program users, a user

                                           5
              Case: 14-14943       Date Filed: 05/08/2015   Page: 6 of 10

of Intelligent Audit can “readily ascertain the appearance and functionality of the

system and, thus, the visible output cannot be a trade secret pursuant to O.C.G.A.

§ 10–1–761(4)(A).” Here, the parties agreed that ILL did not have access to

Intelligent Audit’s source code.

      The district court rejected WSI’s contention that, because WSI took steps to

preserve the confidentiality of Intelligent Audit, the “self-revealing nature” of the

program’s functionality did not preclude the program’s status as a trade secret.

The district court noted that there was no evidence that WSI required ILL to sign a

confidentiality agreement. The only efforts WSI actually took to maintain

secrecy—verbally warning ILL of the confidential nature of the program and

requiring customers to access the system with a username and password—were not

reasonable under the circumstances to keep the program’s visible output secret.

Accordingly, the district court granted ILL summary judgment on WSI’s

misappropriation of trade secrets claim.

      On October 9, 2014, the district court granted WSI’s unopposed motion for

entry of final judgment under Federal Rule of Civil Procedure 54(b). The court

found that “pressing needs for a prompt resolution of the issues concerning

[WSI’s] claim for misappropriation of trade secrets warrant certifying the dismissal

of that claim as a final judgment.” On the same day, the clerk entered a separate

judgment in favor of ILL on WSI’s claim for misappropriation of trade secrets.

                                            6
                Case: 14-14943        Date Filed: 05/08/2015        Page: 7 of 10

       WSI timely appealed.3

                                       II. DISCUSSION

       A claim for misappropriation of trade secrets under the GTSA requires a

plaintiff to prove that “(1) it had a trade secret and (2) the opposing party

misappropriated the trade secret.” Penalty Kick Mgmt. Ltd. v. Coca Cola Co., 318
F.3d 1284, 1290-91 (11th Cir. 2003) (quotation omitted). Whether information

constitutes a trade secret is a question of fact. Id. at 1291. The GTSA defines a

“trade secret” as

       information, without regard to form, including, but not limited to,
       technical or nontechnical data, a formula, a pattern, a compilation, a
       program, a device, a method, a technique, a drawing, a process,
       financial data, financial plans, product plans, or a list of actual or
       potential customers or suppliers which is not commonly known by or
       available to the public and which information:

               (A) Derives 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

               (B) Is the subject of efforts that are reasonable under the
               circumstances to maintain its secrecy.

O.C.G.A. § 10–1–761(4).

       Here, the only dispute concerns two of the required statutory elements:

whether Intelligent Audit was (1) not “readily ascertainable by proper means” and

       3
         We conclude that the district court did not abuse its discretion in finding “no just reason
for delay” and certifying the July 7, 2014 order as a final judgment under Rule 54(b). See Fed.
R. Civ. P. 54(b).
                                                 7
               Case: 14-14943    Date Filed: 05/08/2015      Page: 8 of 10

(2) “the subject of efforts that are reasonable under the circumstances to maintain

its secrecy.” See id.

      WSI relies heavily on an unpublished decision from the Northern District of

Georgia, AirWatch, LLC v. Mobile Iron, Inc., No. 1:12-cv-3571, 2013 WL
4757491 (N.D. Ga. Sept. 4, 2013). Based on that decision, WSI argues that the

functional aspects of Intelligent Audit, such as its report generation and data-

processing features, were kept sufficiently secret to qualify as trade secrets under

Georgia law.

      The district court in AirWatch acknowledged case law distinguishing

between a software program’s underlying source code and its visible output, but

nevertheless found that “information regarding [the plaintiff’s security software for

mobile phones] may still be a trade secret, if [the plaintiff] can show that it worked

to preserve the secrecy of its program’s functions, specifications, and pricing.”

2013 WL 4757491, at *4. The nature of the software in AirWatch was “not such

that a typical [smartphone] user . . . would be exposed to the software’s capabilities

by using the program.” Id. Thus, offering free trials of the program to licensees

who were subject to confidentiality provisions did not “per se forfeit the program’s

trade secret status.” Id. Accordingly, the district court denied the defendant’s

motion to dismiss for failure to state a claim. Id. at *5.

                                           8
              Case: 14-14943    Date Filed: 05/08/2015    Page: 9 of 10

      In contrast to the software in AirWatch, dissemination of Intelligent Audit to

users necessarily revealed the information WSI alleges to be secret (i.e., the

program’s “features and functions”). We note that WSI did not allege

misappropriation of the program’s source code, and the parties do not dispute that

no one outside of WSI had access to the source code. Even assuming the

functionality of the Intelligent Audit program was not “readily ascertainable by

proper means,” a review of the record reveals that WSI’s efforts to maintain

secrecy were not reasonable under the circumstances.

      The record indicates that Lebovich verbally instructed ILL to keep

Intelligent Audit confidential, and there is some evidence that ILL required its own

customers to sign confidentiality agreements. Yet it is undisputed that WSI did not

require ILL to sign any written agreement before granting ILL “high-level

administrative access” to Intelligent Audit. Though not dispositive, the absence of

a written non-disclosure agreement is relevant to assessing whether WSI took

reasonably available steps to preserve the program’s secrecy. WSI points to use of

“numerous confidentiality measures,” including limiting access to authorized users

as well as employing encryption and password protection. However, these security

measures served to restrict access to customer data—which WSI does not claim as

trade secrets—rather than the functionality of the program itself. How Intelligent

                                          9
             Case: 14-14943    Date Filed: 05/08/2015    Page: 10 of 10

Audit looked and worked was readily apparent to authorized users with an ID and

password.

      In sum, WSI failed to meet its burden of presenting sufficient evidence from

which a reasonable jury could find that the “features and functions” of Intelligent

Audit qualify as trade secrets under the GTSA. We therefore affirm the district

court’s grant of summary judgment in favor of ILL on WSI’s claim for

misappropriation of trade secrets.

      AFFIRMED.

                                         10