Category Archives: Trade Secrets

Inability to Identify Trade Secrets Dooms Misappropriation Claim

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In Wilbur-Ellis Co. v. Gompert, No. 25-1577 (8th Cir. July 7, 2026), the Eighth Circuit affirmed the district court’s grant of summary judgment in favor of Wilbur-Ellis’s former employees, concluding that Wilbur-Ellis failed to adequately identify its trade secrets.

Wilbur-Ellis must have felt it had a good case. Several of its employees quit in August 2024, and within three days they were working for a competitor while still drawing their salaries from Wilbur-Ellis. A total of eleven employees left. At least two of the departing employees downloaded and accessed files stored on Wilber-Ellis devices during their last weeks of employment. The departing employees reset their devices before returning them to Wilbur-Ellis. Wilbur-Ellis acted without delay, suing two of the employees four days after they left the company alleging breach of the duty of loyalty, misappropriation of trade secrets under the federal Defend Trade Secrets Act (DTSA) and the Nebraska Trade Secrets Act (NTSA), and tortious interference with its business relationships, and adding two more employees within two weeks.

When ordered to disclose with specificity the trade secrets that were misappropriated, Wilbur-Ellis produced a six-page document that described its alleged trade secrets with phrases like “[d]ocuments and information regarding Wilbur-Ellis’s business and market strategy,” “[d]ocuments and information relating to Wilbur-Ellis’s customers,” and “nonpublic customer proposals, pricing and rebate data.”

The Eighth Circuit agreed with the district court’s observation that that Wilbur-Ellis “paint[ed] with a broad brush, never clearly and adequately identifying the ‘trade secrets’ at issue, let alone how they were used or misused or the damages reasonably attributable to each defendant.” The district court also stated that “Wilbur-Ellis’s reliance on broad terms, general descriptions, and repeated, non-specific references . . . do not suffice. Without more, much of the information it designates as trade secrets also appears to be public or unprotected.” The Eighth Circuit said that because we agree with the district court’s finding that Wilbur-Ellis “never clearly and adequately identif[ied] the ‘trade secrets’ at issue, let alone how they were used or misused,” we hold that it did not err in granting summary judgment on Wilbur-Ellis’s trade secrets claims.

Eliis-Wilbur certainly had trade secrets, and they very well may have been misappropriated. But, like many trade secret owners they simply were not prepared for the level of detail neccessary to adequately identify their trade secrets. Here is a ten-point plan for being prepared to successfully make a trade secret claim:

1. Maintain a Formal Trade Secret Inventory

The single most valuable thing a company can do is maintain a living trade secret inventory. The inventory should identify each trade secret, rather than merely categories of confidential information. For example, instead of “manufacturing process” the inventory should identify “Multi-stage catalytized reduction process for reducing sulfur impurities below 5 ppm using catalyst sequence A-B-C, operating temperatures of 180-195, . . .”.

The inventory should include:

  • Name of trade secret
  • Description
  • Business purpose
  • Why it is valuable
  • Why competitors do not know it
  • Persons with access
  • Documents containing it
  • Date created
  • Updates
  • Owner/business unit
  • Security measures

2. Divide Trade Secrets into Individual Assets

Many companies identify trade secrets too broadly. Courts dislike descriptions like: “Our customer relationships.” Instead identify:

  • pricing model
  • discount formulas
  • customer purchasing histories
  • purchasing forecasts
  • customer-specific technical requirements
  • supplier cost information
  • margin calculations
  • manufacturing tolerances
  • production scheduling algorithms

Each may be a separate trade secret.

3. Map Trade Secrets to Documents

Every trade secret should be tied to specific documents. For example, Trade Secret 1 is reflected in:

  • Engineering Specification ENG-12
  • CAD Assembly 3.1
  • Laboratory Notebook 5. p. 45
  • Git repository revision
  • Manufacturing SOP 3

This later makes identification dramatically faster and easier.

4. Classify Information

Implement levels such as:

  • Public
  • Internal
  • Confidential
  • Highly Confidential
  • Trade Secret

Employees should know what qualifies as merely confidential and what qualifies as a trade secret.

5. Mark Trade Secret Documents

Whenever practical, documents should be marked “CONFIDENTIAL” or CONFIDENTIAL – TRADE SECRET.” Although not legally required, consistent marking supports the argument that reasonable secrecy measures were employed.

6. Record Why Information is Secret

For each trade secret document, record:

  • not publicly known
  • independently developed over years
  • cost to develop
  • competitive advantage
  • inability to reverse engineer
  • limited employee access

Later these become litigation evidence.

7. Maintain Development Histories

Keep (securely):

  • laboratory notebooks
  • engineering notebooks
  • Git history
  • version histories
  • project timelines
  • design reviews
  • invention disclosures

These establish originality and value.

8. Document Security Measures

Maintain records showing:

  • NDAs
  • employee confidentiality agreements
  • vendor agreements
  • password restrictions
  • VPN controls
  • encryption
  • badge access
  • visitor logs
  • clean desk policies
  • information security policies
  • annual employee training

Reasonable secrecy measures are an essential element of a trade secret claim under both the federal and most state trade secret statutes.

9. Conduct Regular Trade Secret Audits

Periodically ask: “What information would hurt us if our largest competitor obtained it tomorrow?” and update the trade secret inventory.

10. Prepare Employee Departure Files

For employees with significant confidential access, maintain records of:

  • systems accessed
  • projects
  • customer responsibilities
  • confidential files used
  • inventions worked on
  • exit interview certifications

Gnireenigne

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Reverse engineering (now does the title make sense?) is a common and legitimate business practice.  The recent federal Defend Trade Secrets Act specifically excludes reverse engineering from the definition of misappropriation.  18 USC §1839(6) (“the term ‘improper means’ . . . (B) does not include reverse  engineering.”).   While the Uniform Trade Secrets Act (some form of which is in force in 48 states and the District of Colombia) does not expressly mention reverse engineering, the Comments to Section 1 adopt the Restatement of Torts position that “Discovery by ‘reverse engineering’, that is, by starting with the known product and working backward to find the method by which it was developed” is not an improper means of acquiring a trade secret (provided the acquisition of the product was by a fair and honest means).

Thus if an unpatented product is acquired legally, and there is no enforceable promise not to reverse engineer, the owner of the product is free to analyze and copy the product.   Some courts have enforced  “no reverse engineering” clauses[1].  However after Impression Products, Inc. v. v. Lexmark International, Inc,  such restrictions may not be enforceable beyond the first purchaser, and in any event, at least some courts have found such “no reverse engineering” clauses unenforceable, for example where they interfere with the fair use of computer software.[2]

A business including reverse engineering as part of its product development process should be careful not to cast its own activities in a false light.  Emails and other internal documents referring to the business’ reverse engineering efforts as “knocking off” or similarly disparaging terms, may unfairly portray the company and its products should there be litigation in which the these documents come to light.  A business should instead accurately characterize its efforts as developing non-infringing competitive products, of which reverse engineering is just one part.

 

[1] See K&G Oil & Tool Service Co. v. G&G Fishing Tool Service, 158 Tex. 94, 314 S.W.2d 782, 785-86 (1958)(enforcing a negotiated agreement not to reverse engineer); Pioneer Hi-Bred Int’l, Inc. v. DeKalb Genetics Corp., 51 U.S.P.Q. 1987 (S.D. Iowa 1999)(enforcing “bag tag” restrictions on use of seed for research purposes).

[2] See Vault Corp. v. Quaid Software Ltd., 847 F.2d 255 (5th Cir. 1988).

 

Give a Man Cupcake Sushi, and He’ll Have Dessert for a Day; Teach a Man to Make Cupcake Sushi, and He’ll Rip You Off

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Lori Shubert and her company Cupcake Sushi, LLC filed an interesting lawsuit against Santiago and his associates doing business as Sushi Sweets, for patent infringement, trademark infringement, misappropriation of trade secrets, common law trademark infringement, federal and state unfair competition, and trade dress infringement. Shubert claims to have invented a unique confectionery dessert cake: cupcake sushi. Shubert has apparently built a thriving business in Key West Florida.  According to the complaint, Santiago, a former licensee and employee of Cupcake Sushi, absconded with product, equipment and Cupcake Sushi’s trade secrets.

Shubert clearly had an interesting and appealing idea, and while she took some steps to protect it, she probably should have formed a more comprehensive plan at the outset.  As she pleads in her lawsuit she applied for a utility patent (14/487364), she allowed the application to abandon.  She also applied for and obtained a design patent (D789,025) but filed the application several years after she claims to have developed her product.  Even if this patent validly protects a later design, she left her earlier designs exposed. While she did register her CUPCAKE SUSHI name and logo (Reg. Nos. 4471750 and 4770652), she might have also tried to protect her products names and appearances.

Resources are always tight in start-ups, and it is easy to second guess the allocation (or lack thereof) to lawyers, as entrepreneurs always seem to have other fish to fry. Shubert probably could have done more and done it sooner.  Shubert did take a number of appropriate steps to protect herself, and if those rights have been violated, then hopefully she will be able to enforce them and this won’t represent the fish that got away.  However, a more comprehensive approach might have made enforcement like shooting fish in a barrel:

Shubert may have learned another important lesson about protecting confidential information.  A confidentiality agreement does not make a dishonest person honest. The most important steps in protecting confidential information is limiting disclosures to people who can be trusted.

Shubert may have to also have to face the fact that no matter how comprehensive your intellectual property protection, there will always be some way for other to compete.  Good luck to Ms. Shubert, but if things don’t work out, there are always other fish in the sea.

Imagining the Perfect Confidentiality Agreement

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The perfect confidentiality agreements is, in most cases, overkill and in any event probably never would be signed. Hundreds, if not thousands of CDAs, NDAs, and other secrecy agreements are signed every day, and the vast majority perform adequately for their purpose.  Rather than chase perfection, the parties should focus on avoiding mistakes.

From the Perspective of the Disclosing Party

Prevent disclosure and use.  The disclosing party should make sure that the agreement not only prevents disclosure but also use of the confidential information.

Define protected information. The definition of protected information should include anything that the disclosure is likely to disclose.  The disclosing party should resist requirements that could result in accidental forfeiture, such as requirements that the information be marked confidential or that oral disclosures must be confirmed in writing.

Define the time.  The duration of the receiving party’s obligations should be clearly defined, as should the period of time during which the disclosing party can disclose information under the agreement.

Have an enforcement plan.  If the party to the agreement discloses or uses the information, there is a breach of contract action.  However, if a rogue employee or contractor, who is not a party to the agreement, discloses or uses the information, what is the plan?  The agreement can provide a right of enforcement, or require the receiving party to enforce the agreement on the disclosing party’s behalf.

Unnecessary obligations.  While it is easier to get a reasonable agreement when the provisions are mutual, a disclosing party should not accept confidentiality obligations to the receiving party if it does not need to.

Disclosing Party Options.  Ownership. The disclosing party may want to control ownership of inventions inspired by the disclosed invention.  Non-filing.  The disclosing party may want to restrict the receiving party from filing patent applications on subject matter inspired by the disclosure.  No Export.  The disclosing party may want to prevent export of the information.  Choice of law.  The disclosing party may want to select law that will protect the disclosed information.  Choice of forum.  The disclosing party may want to select a forum that is convenient and reliable, No warranties.  The disclosing party may want to disclaim any warranties about the disclosed information.  No obligation.  The disclosing party may want to disclaim an obligation to deal further with the disclosing party.

From the Perspective of the Receiving Party

Define protected information.  The receiving party needs to precisely define the information that is subject to the confidentiality obligations,

Exceptions.  The receiving party should define exceptions to its obligations for information that is already in the public domain; information that the receiving party already had in its possession, and information that subsequently comes into its possession other than from a breach of duty to the disclosing party.

Define the time. The receiving party needs to know how long to maintain confidentiality, and how long the disclosing party can make disclosures that the receiving party has to protect.

Receiving Party Options.  Confidentiality. The receiving party may want some protection for its own information that it might exchange with the disclosing party.  No obligation.  The receiving party  may want to disclaim an obligation to deal further with the disclosing party.  Choice of Law.  The receiving party may want to know the law that applies to the construction and enforcement of the agreement.   Choice of forum.  The receiving party may want to limit where it can be sued to enforce the agreement.

Checklist for a Confidentiality Agreement

  1. Parties properly identified
  2. Definition of protected information
  3. Obligation not to disclose protected information
  4. Obligation not to use protect information
  5. Duration of obligation to protect protected information
  6. Duration of agreement (period of disclosures by disclosing party)
  7. Indemnity by receiving party for breaches by those to whom it discloses the protected information
  8. Representations by receiving party
    1. Ability to enter into agreement
    2. Agreements with third parties to ensure performance
  9.  Ownership of developments based upon disclosed information.
  10. Promise not to file filing patent applications on subject matter inspired by the disclosure.
  11. No Export of the disclosed information.
  12. Choice of law that applies to the agreement.
  13. Choice of forum where agreement can be enforced.
  14. Disclaimer of warranties regarding the disclosed information.
  15. Disclaimer of obligation to deal further with the other party.
  16. Boilerplate
    1. Assignability
    2. Severability
    3. Effectiveness of copies
    4. Integration
    5. Authority of Signatories

 

 

Is the Inevitable Disclosure Doctrine Inevitable?

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An important feature of the recently enacted Defense of Trade Secrets Act was that it left state trade secret law intact.  This meant that states that had adopted the Inevitable Disclosure Doctrine could continue to apply it, and states that had not adopted the Doctrine (e.g., California Bayer Corp. v. Roche Molecular Sys.,
Inc., 72 F.Supp.2d 1111 (N.D. Cal. 1999), and Florida Del Monte Fresh Produce Co. v. Dole Food Co., Inc., 148 F.Supp.2d 1326 (S.D. Fla. 2001).) were not forced to adopt it.  This Doctrine, established by the Seventh Circuit in PepsiCo, Inc. v. Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995), allows a trade secret owner to prove a claim of trade secret misappropriation by demonstrating that the defendant’s new employment will inevitably lead him to rely on the plaintiff’s trade secrets.

It would appear that the Inevitable Disclosure Doctrine is but one way of proving a “threatend missapproiation” prohibited by Mo.Rev. State. 417.455 of the Missouri Uniform Trade Secrets Act.  However the status of the Doctrine of Inevitable Disclosure in Missouri is unclear.  At least three cases discuss the Doctrine, and while they found it inapplicable under the particular circumstances, did not reject the Doctrine outright.  See, Lasco Foods,, Inc. v. Hall & Shaw Sales, Mktg. & Consulting, L.L.C., No. 4:08cv01683, January-February 2015 / 33 2009 WL 3834099, at *2 (E.D. Mo. Nov. 16,2009); Carboline Co. v. Lebeck, 990 F.Supp. 762, 767-68 (E.D. Mo. 1997), and H & R Block Eastern Tax Servs., Inc. v. Enchura, 122 F. Supp. 2d 1067, 1075 (W.D. Mo. 2000).

In H & R Block Eastern Tax Servs., Inc. v. Enchura, 122 F. Supp. 2d 1067, 1075 (W.D. Mo. 2000), the district court indicated that “inevitability alone is insufficient to justify injunctive relief; rather, demonstrated inevitability in combination with a finding that there is unwillingness to preserve confidentiality is required.” Other factors that might be analyzed in determining whether to apply the doctrine:include:

  • whether the employee will have a decision making role at the new employment;
  • whether the responsibilities at the respective jobs are similar;
  • whether the employee will be developing new products; whether the employee was involved in the creation of the trade secrets at issue; and
  • whether the trade secrets are easily subject to memorization.

It would seem that if in fact the disclosure of a trade secret could be shown to be inevitable, then relief under the Missouri Uniform Trade Secret Act (Mo.Rev. State. 417.455), which authorizes injunction again threatened misappropriation would be appropriate. Such an injunction would even appear to be appropriate under the Defense of Trade Secrets Act, which requires that “conditions placed on such employment shall be based on evidence of threatened misappropriation and not merely on the information the person knows” would also be appropriate.  18 USC 1936(b)(3)(A)(i)(I).