New Wisconsin Court of Appeals Opinion Examines Whether “Information” can be Trade Secret
Last week, the Wisconsin Court of Appeals District IV issued an opinion in North Highland Inc. v. Jefferson Machine & Tool Inc., et al., which examined whether certain information could qualify as “trade secret” under state statute. Specifically, at issue in the case was whether a manufacturing company’s confidential competitive bid amount could be protected by Wisconsin’s trade secret statute. The case presents a unique analysis on an issue not the typical subject of trade secret litigation.
In 2011, North Highland prepared a bid for Tyson Foods, Inc. related to a project at one of Tyson’s facilities. Dwain Trewyn was an employee of North Highland who helped prepare its bid. However, Trewyn left his employment and formed Jefferson Machine & Tool, Inc. with Frederick Wells. That new company eventually won the bid from Tyson Foods, Inc. North Highland’s suit alleged that Trewyn used the confidential bid amount he prepared for North Highland to undercut North Highland and win the project for Jefferson Machine. One of North Highland’s claims alleged that the bid amount Trewyn used was trade secret and misappropriated by Trewyn when he helped created Jefferson Machine.
Like most states, Wisconsin’s protections for trade secrets are set out by statute. Wisconsin’s law is at Wis. Stat. § 134.90. Trade secret is defined by the statute as “information, including a formula, pattern, compilation, program, device, method, technique, or process.” Additionally, and generally stated, the information must have economic value from not being known by the public and is the subject of reasonable efforts to maintain its secrecy. Parties in trade secret litigation often argue over one of two issues: (1) whether the information was taken, or otherwise known as “misappropriated,” by one party from the other; or (2) whether the information was subject of reasonable efforts to maintain its secrecy to qualify as trade secret.
The North Highland case did not address either of these common issues. Instead, the court of appeals looked at a unique issue of whether the information at issue could be “information” subject to the trade secret statute. The court rejected the defendants’ argument that the use of the word “including” in the statute was restrictive and that information must be a “formula, pattern, compilation, program, device, method, technique or process” to be protected. But the court also rejected the plaintiff’s argument that “information” in the trade secret statute takes a broad, dictionary definition of the term. Ultimately, the court concluded that the illustrative examples used by the law in defining “information” are narrower than a dictionary definition. The court also concluded that North Highland did not meet its burden to show that a confidential bid amount is the same type of information encompassed by the illustrative examples provided by the statute.
Trade secret statutes can often be a “fall back” position to seek legal relief when an employer does not take a more pro-active approach. For companies that rely on confidential information that may lose value over time, they may be better served by a restrictive covenant agreement with employees who have access to it. Such an agreement can protect a company from competition by an employee who can use the company’s confidential information against it. However, the North Highland opinion also presents an important lesson that not all information can be trade secret information.