How Not to Build a Case of Trade Secret Misappropriation

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The US Court of Appeals for the Ninth Circuit affirmed a dismissal of trade secret claims, finding that although misappropriation of a trade secret prior to the enactment of the Defend Trade Secrets Act (DTSA) does not preclude a claim arising from post-enactment or continued use of the same trade secret, the publication of a trade secret in a patent application extinguishes trade secret status. Eli Attia; Eli Attia Architect PC v. Google LLC, et al., Case No. 19-15771 (9th Cir. Dec. 16, 2020) (Wallace, J.)

Eli Attia is an architect who developed a system and method for automated design, fabrication and construction, called Engineered Architecture (EA). In 2010, Attia entered into a partnership with Google. Attia disclosed his trade secrets related to the technology to Google so that they could work together to develop a program that would implement EA. Attia executed patent assignments with Google, and a year later Google filed patent applications related to the EA trade secrets. The patents were published in 2012. Google then allegedly excluded Attia from the project and used EA to create Flux, a platform used by architects, engineers and construction workers, focused on making buildings more efficient and using artificial intelligence to streamline the design process.

In 2014, Attia sued Google under state law for trade secret misappropriation and breach of contract. In 2016, Congress enacted the DTSA. Since its inception, DTSA has been an enumerated predicate for the civil Racketeer Influenced and Corrupt Organizations Act (RICO), which means that plaintiffs can bring lawsuits claiming a conspiracy when theft of trade secrets is an underlying claim. Attia amended his complaint to add RICO claims based on Google’s alleged trade secret misappropriation. Google removed the action to federal court and moved to dismiss. Attia filed another amended complaint, this time asserting a new DTSA claim and two RICO claims.

The district court dismissed Attia’s federal claims with prejudice and declined to exercise supplemental jurisdiction over the state law claims. The district court found that the alleged trade secrets were already disclosed in Google’s 2012 published patent applications, and those publications extinguished the relevant trade secrets. The court held that Attia lacked standing to assert DTSA or RICO claims, and neither estoppel nor continued use could convert the 2012 publications into a DTSA violation. Attia appealed.

On appeal, the Ninth Circuit noted that the issue was one of first impression before the Court, and set out to determine whether, as a matter of law, the pre-enactment disclosure of a trade secret forecloses the possibility of a DTSA claim arising from the continued use of the trade secret after enactment. The Uniform Trade Secrets Act (UTSA), the established model statute for trade secret misappropriation that has been adopted by the majority of the states, contains an anti-continued use provision, the Court noted. The UTSA states that “ a continuing misappropriation that began prior to the effective date,”… “does not apply to the continuing misappropriation that occurs after the effective date.” The DTSA does not contain a similar provision, and the Ninth Circuit determined that the DTSA, therefore, is not limited to misappropriation that began after enactment of the DTSA. The Court also considered the intent of Congress and found that the legislature was aware of the role and limitations of the UTSA as model legislation for the states and recognized the DTSA and UTSA as similar. The Ninth Circuit concluded that “the misappropriation of a trade secret prior to the enactment of the DTSA does not preclude a claim arising from post-enactment misappropriation or continued use of the same trade secret.”

Turning to the effect of the alleged trade secrets’ publication in Google’s patent applications, the Ninth Circuit found it to be well-settled in law that the disclosure of a trade secret in a patent application extinguishes the information’s trade secret status. Google filed the patent applications in 2011, with Attia’s permission and knowledge that the patents would be available to the public. The Court explained that a plaintiff has a viable trade secret claim only if what is revealed implements details and techniques beyond what was disclosed in the published patent applications. Since Attia admitted that the alleged trade secrets were parallel to what was disclosed in the patent applications, his trade secrets were extinguished.

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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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