Co-authored by Viktoria Lovei.
The U.S. Court of Appeals for the Eighth Circuit recently held that compilations containing only minimal secret information nevertheless qualified for trade secret protection because the substantial investment involved in preparing them gave their owner a competitive advantage and because the owner undertook reasonable efforts to maintain their secrecy by labeling them with a proprietary legend and only distributing them to parties which signed a confidentiality agreement. AvidAir Helicopter Supply, Inc. v. Rolls-Royce Corporation, Case No. 10-3444 (8th Cir. Dec. 13, 2011).
The case concerned FAA approved procedures developed by Rolls-Royce for the overhaul and repair of its helicopter engines. The procedures, including techniques and material specifications, were included in Distributor Overhaul Information Letters (“DOILs”) which, starting in 1994, were provided by Rolls-Royce exclusively to its Authorized Maintenance Centers (“AMCs”). While access to pre-1994 DOILs was not tightly controlled, later versions were issued subject to confidentiality agreements with AMCs and contained a proprietary rights legend. AvidAir, a company in the overhaul business, was not an AMC but nonetheless obtained updated DOILs which it was not authorized to receive.
The parties filed separate lawsuits against each other which were eventually consolidated. Among the issues raised were whether the DOILs are trade secrets and whether Rolls-Royce’s efforts to protect the DOILs constituted a “sham lawsuit” in violation of antitrust law and tortious interference.
The Eighth Circuit, applying the Uniform Trade Secrets Acts of Indiana and Missouri, held that AvidAir had misappropriated Rolls-Royce’s trade secrets. The Court rejected AvidAir’s argument that the revised DOILs did not qualify for trade secret protection because they contained no engineering advances and only a trivial amount of information that was not readily ascertainable from prior public versions. The Court explained that compilations are valuable if they afford a “competitive advantage” and are “not readily ascertainable,” even if “some or even most of the information [is] publicly available.” “Unlike patent law, which predicates protection on novelty and nonobviousness, trade secret laws are meant to govern commercial ethics” and prevent valuable information “from being misappropriated despite reasonable efforts to keep it secret.”
The Eighth Circuit found that the DOILs were trade secrets because they had value that resulted from Rolls-Royce’s “own research and testing” which allowed Avid Air to avoid the “burdensome expense of reverse engineering the updated specifications.” The Court further noted that AvidAir’s repeated attempts to obtain the information “without Rolls-Royce’s approval belies its claim that the information in the documents was readily ascertainable or not independently valuable.” In addition, the Court held that the documents qualified for trade secret protection because Rolls-Royce had undertaken reasonable efforts, which do not need to be “overly extravagant,” to maintain their secrecy by labeling them with a proprietary legend and only distributing them to parties which had signed a confidentiality agreement. The Court concluded that AvidAir’s unauthorized use of the documents constituted misappropriation and affirmed an award of damages and injunctive relief.
Having found in favor of Rolls-Royce on the issue of whether the DOILs were trade secrets, the Court held that AvidAir had no claim for tortious interference or violation of anti-trust law stemming from Rolls-Royce’s efforts to protect the confidentiality of the DOILs.