Decision Insights: Publicly Available Ingredients Do Not Invalidate Source Code’s Trade Secret Status

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The recent decision in Decision Insights, Inc. v. Sentia Group, Inc., No. 09-2300 (4th Cir., Jan. 28, 2011), features two reversals of district court decisions involving a bedrock trade secrets principle: just because a secret recipe uses publicly available ingredients, it does not necessarily mean that the recipe is not a secret.

As in the recent cases involving Goldman Sachs and Société Générale covered by this Blog, the crux of the corporate espionage claims in Decision Insights involve the purported pilfering of computer source code against the familiar backdrop of sharp competition between two companies and employee defection. As described in the appellate court’s opinion, Decision Insights developed and owned software called the “Dynamic Expected Utility Model.” It is an analytical tool used to prepare negotiating strategies using modeling techniques similar to game theory analyses: the application “assesses risk, compares the impact of different operating positions, and details the relative effects of selecting various alternatives.” Id. at pages 3 – 4. Three of the Decision Insight employees who developed the software formed a competitor, Sentia.

According to the appellate court, Sentia initially tried to obtain a software license from Decision Insights that would allow Sentia to use the software, but this effort failed. Sentia then hired a former Decision Insights consultant, who worked on the source code for Decision Insights’ software, to develop a product that would compete directly with Decision Insights’ software. The consultant completed this task in approximately six weeks, which Decision Insights alleged was impossible unless Sentia used Decision Insights’ source code. Id. at page 5. Also, Decision Insights claimed that its software was nearly identical

to Sentia’s, in terms of its analytical methodology and the results obtained when the two programs were run. This alleged misuse of Decision Insights’ source code was the basis of Decision Insights’ claims under the Virginia Trade Secrets Misappropriations Act.

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Published In: Business Torts Updates, Civil Procedure Updates, Labor & Employment Updates, Science, Computers & Technology Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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