Trade Secrets: What You Should Know From 2024 to Prepare for 2025

January 22, 2025

Summary

Trade secrets remain crucial to companies around the world, preserving their most sensitive and valuable information. From energy to healthcare to agriculture, companies in every industry seek to better develop, protect and enforce their trade secrets and prevent unfair competition.

In 2024, courts in the United States issued hundreds of trade secrets opinions, analyzing a variety of emerging issues on liability and damages. This report summarizes the key elements of trade secrets claims that will likely impact plaintiffs and defendants in 2025 and beyond:

  1. Identification of Trade Secrets
  2. Not Publicly Known or Readily Ascertainable
  3. Reasonable Safeguards or Measures
  4. Complementing Patent Protection
  5. Methods of Misappropriation
  6. Damages and Collection

For more information about this report or how best to prosecute or defend trade secrets claims, contact the authors at McGuireWoods.


1. Identification of Trade Secrets

Trade secret identification is the process by which a plaintiff defines the specific information that it seeks to enforce as a trade secret. This process is not only crucial to successful litigation, but it also benefits both parties and the court. Early identification demonstrates that a plaintiff has a legitimate claim, reducing the risk of dismissal. It also streamlines discovery for the parties by focusing on the key information at issue. And early trade secret identification enables courts to better assess the validity of trade secret claims and reduce the risk of fishing expeditions between competitors.

A recent case in 2024 demonstrates the importance of trade secret identification. In Double Eagle Alloys, Inc. v. Hooper, Double Eagle Alloys alleged that its former employee, Michael Hooper, “took with him notes from his time as a sales representative for Double Eagle and over 2,600 digital files downloaded from his work computer onto a portable electronic storage device.” No. 19-CV-243, 2024 WL 3166921, at *1 (N.D. Okla. June 25, 2024). Though the files contained categories of information such as “specifications, its pricing, margins, costs, and customer drawings,” Double Eagle did not specify which documents were its trade secrets and which were disclosed to third parties without reservation, such as price quotes to customers. The U.S. District Court for the Northern District of Oklahoma recognized the now-common refrain that “trade-secret litigation is accompanied by the risk that a plaintiff will tailor the scope of its misappropriation claims mid-litigation” based on what discovery reveals. Because Double Eagle failed to identify its trade secrets with sufficient particularity to distinguish information that qualified as a trade secret from what did not, the court granted Hooper’s motion for summary judgment. The court also rejected that a trade secret “compilation” existed because Double Eagle did not “describe the combination of elements and explain how the ‘compilation’ is outside the general scope ascertainable by proper means.” This case is on appeal before the U.S. Court of Appeals for the Tenth Circuit.

Different courts require plaintiffs to define their trade secrets with different levels of specificity at different stages of litigation. Regardless of the court, trade secret plaintiffs are well advised to proactively identify their trade secrets as part of a pre-litigation assessment and later in their pleadings — without, of course, disclosing the secret. Without reasonably specific trade secret identification, a claim can fail before it reaches trial. Defendants may raise the deficiency early to stall discovery, dismiss the case at the outset or prevail on summary judgment.

For more information on this topic, see also “It’s No Longer a Secret — Parties Should Identify Their Trade Secrets Early in Litigation.

2. Not Publicly Known or Readily Ascertainable

Trade secrets must not be publicly known or readily ascertainable. The federal Defend Trade Secrets Act (DTSA) protects a wide variety of information as trade secrets if “(A) the owner thereof has taken reasonable measures to keep such information secret; and (B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.” State laws include similar language.

BlueLinx Corp. v. Edwards illustrates why this element is crucial to trade secret protection. No. 3:23-CV-2503, 2024 WL 3174379, at *1 (N.D. Tex. June 24, 2024). BlueLinx Corp. sued 3Wood Wholesale, Joseph Edwards and Trent Tucker alleging that Edwards and Tucker misappropriated its trade secret information. BlueLinx sought a temporary injunction against 3Wood, Edwards and Tucker to prevent them from using its information and contacting its customers.

The U.S. District Court for the Northern District of Texas denied BlueLinx’s request for a temporary injunction, holding that its sworn declarations and exhibits failed to establish that its information was not readily ascertainable through proper means. The court held that “evidence that BlueLinx treats such information as confidential, without more, is not probative of whether the information can be readily ascertainable from other sources.” (emphasis added). Trade secrets plaintiffs need to emphasize not only that they treat their information as confidential, but also that such information is truly secret to the public.

The U.S. Court of Appeals for the Sixth Circuit provided further insight on this threshold in Metron Nutraceuticals, LLC v. Cook, No. 23-3596, 2024 WL 3877388 (6th Cir. Aug. 20, 2024). Metron Nutraceuticals sued Cook for breach of contract and trade secret misappropriation under the Ohio Uniform Trade Secrets Act. The trade secret at issue was an unpublished patent application describing a process for creating nutritional supplements.

Initially, the U.S. District Court for the Northern District of Ohio concluded that Metron failed to establish the first element of a misappropriation claim — existence of a trade secret — because it did not show the information in the application derived independent economic value from not being generally known or readily ascertainable. While “novelty in the patent law sense is not required” for trade secrets, the information must be “unique and competitively advantageous” to reach trade secret status. Observing similar products in the market, the court reiterated that information “generally known in the industry … is not secret and cannot qualify as a trade secret.”

The Sixth Circuit rejected the district court’s finding and held that the presence of other similar products on the market did not establish that Metron’s process was widely known. In its ruling, the Sixth Circuit focused on evidence supporting the inference that Metron’s process was distinctive compared to those in the market. This ruling shed light on what being “known in the industry” means for purposes of trade secret protection. A company’s emphasis on unique and secret processes for a product, even if the products have other similarities to products in the market, can help establish this element.

For more information on this topic, see also “For What It’s Worth: The Increasing Importance of a Trade Secret’s Independent Economic Value.

3. Reasonable Safeguards and Measures to Preserve Secrecy

Proving reasonable safeguards and measures to preserve secrecy is critical to a party’s ability to establish a valid trade secret. Because the DTSA does not provide a precise definition of “reasonable measures,” it does not provide a bright line rule on the requisite safeguards necessary for trade secret protection. The assessment is inherently fact-intensive, thus, a party must rely on case law as guidance. See Fujikura Composite Am., Inc. v. Dee, No. 24-CV-782, 2024 WL 3261214, at *11 (S.D. Cal. June 28, 2024) (finding that “courts have repeatedly held similar steps [i.e., non-disclosure provisions, locked buildings, visitor sign-in, authorized personnel only areas, and secure file servers] likely constitute reasonable protections sufficient to confer trade secret status.”).

In 2024, courts reiterated that the existence of confidentiality or nondisclosure agreements (NDAs) is a critical consideration for reasonable safeguards. Indeed, the “[f]ailure to enter into nondisclosure or confidentiality agreements often dooms trade secret claims.” See Cashman Dredging & Marine Contracting Co., LLC v. Belesimo, No. 21-CV-11398, 2024 WL 4894639, at *8 (D. Mass. Nov. 26, 2024) (finding the lack of confidentiality agreements “weighs against trade secret protection,” but the existence of other measures such as password protections and restricting access resulted in a “genuine dispute concerning whether [the plaintiff] took reasonable measures to protect its trade secrets at the summary judgment stage”); see also Freedom Cap. Grp. LLC v. Blue Metric Grp., LLC, No. 3:24-CV-00369, 2024 WL 3331641, at *9 (M.D. Tenn. July 8, 2024) (finding that, to the extent “[p]laintiff disclosed its alleged trade secrets to its independent contractors without notifying them of the information’s confidential nature or binding them to confidentiality agreements, [p]laintiff is unlikely to be able to show that it undertook reasonable measures to protect the secrecy of its alleged trade secrets.”); see also Valmarc Corp. v. Nike, Inc., No. 3:21-CV-01556, 2024 WL 5056960, at *12 (D. Or. Dec. 10, 2024) (despite allegations that the plaintiff disclosed its trade secrets to third parties without first executing an NDA, the court considered the fact that the defendant knew of NDAs the plaintiff had previously entered due to their close relationship, and the plaintiff required all its employees to enter confidentiality agreements).

However, when relying on a confidentiality or nondisclosure agreement, a party must be careful to sufficiently plead its trade secrets and show that the information at issue falls under the relevant provisions of the agreement. Heritage Fence Co. v. Malin, No. CV 24-2650, 2024 WL 5047468, at *4 (E.D. Pa. Dec. 9, 2024) (when the plaintiff required employees to enter confidentiality agreements and labeled some documents as confidential, but the plaintiff failed to plead “that [the] documents were specifically identified as confidential, much less identified the specific confidential documents at issue,” the plaintiff failed to show it had taken reasonable measures.).

Additionally, in EIS Ultimate Holding, LP v. Huset, the U.S. District Court for the District of Colorado reiterated that “reasonable safeguards” sufficient for the protection of confidential information are likewise sufficient for trade secrets. No. 23-CV-02324, 2024 WL 4472008, at *13 (D. Colo. Sept. 19, 2024). In other words, a party need not take steps to safeguard its trade secrets distinct from any protections in place to safeguard a party’s confidential information. The court noted that “the DTSA does not require an entity to initially parse out its trade secrets from its more general confidential information and employ unique protections as to its trade secrets.”

The court found that the plaintiff’s efforts to safeguard its trade secrets and other confidential documents — i.e., restricting the group of employees with access, including confidentiality directives in its employee handbook, requiring high-level employees to enter confidentiality agreements and storing information on a password protected drive — were reasonable.

4. Complementing Patent Protection

The oft-cited claim that patents and trade secrets cannot coexist is based on the fact that patents are publicly disclosed: “The subject of the trade secrets must be technically different from the publicly disclosed patent claims. This is just the nature of trade secrets and patents.” Masimo Corp. v. Apple Inc., No. CV 20-00048, 2024 WL 4800663, at *3 (C.D. Cal. Aug. 7, 2024).

However, as shown by the Metron case above, somewhere in the margin is protectable information related to a patented technology that is not disclosed in a patent application. This might include undisclosed information gathered during research and development, proprietary methods and processes for manufacturing or using a patented product, and patented characteristics that, when combined, enhance the overall value.

In 2024, courts continued to support the notion that patents and trade secrets can work together, providing a broader range of protection for intellectual property portfolios. For example, in Safe Haven Wildlife Removal & Prop. Mgmt. Experts, LLC v. Meridian Wildlife Servs. LLC, the U.S. District Court for the Western District of Virginia determined that, while a patent disclosed certain aspects of a “bird capture system,” it did not encompass other related intellectual property, such as “customer information or behavior analysis methods.” 716 F. Supp. 3d 432, 449 (W.D. Va. 2024). Consequently, “the public filing of the patents did not contain the trade secrets implicated here and thus did not impact the secrecy of these trade secrets.”

While patents and trade secrets are viewed in part as opposites — patents require public disclosure, and trade secrets require confidentiality — seeking patent protection for aspects of a technology while retaining trade secret status for others may provide the best protection for a company’s intellectual property portfolio.

For more information on this topic, see also “Can Opposites Attract? Protecting a Company’s Intellectual Property Through Patents and Trade Secrets.

5. Methods of Misappropriation

A trade secrets claim cannot prevail without facts or conduct showing misappropriation. In 2024, courts continued providing guidance on misappropriation through acts of acquisition, disclosure and use.

For example, in Motorola Solutions, Inc. v. Hytera Communications Corporation Ltd., 108 F.4th 458, 468 (7th Cir. 2024), Motorola alleged that China-headquartered Hytera tried to “leap-frog” Motorola by poaching three of Motorola’s Malaysia-based engineers, offering them high-paying jobs in exchange for Motorola’s proprietary information. At Hytera’s direction, the engineers allegedly downloaded thousands of documents and files containing Motorola’s trade secrets. Relying on that material, between 2010 and 2014, Hytera launched a line of radios that were functionally indistinguishable from Motorola’s and marketed and sold these their radios in the U.S. and abroad.

The U.S. Court of Appeals for the Seventh Circuit held that Hytera misappropriated Motorola’s trade secrets by using them in the U.S. The court found that Hytera’s acts of advertising, promoting and marketing Motorola’s products at numerous trade shows in the U.S. were domestic acts of misappropriation. The court reasoned that “use” means “any exploitation of the trade secret that is likely to result in injury to the trade secret owner or enrichment to the defendant, including marketing goods that embody the trade secret, employing the trade secret in manufacturing or production, relying on the trade secret to assist or accelerate research or development, or soliciting customers through the use of information that is a trade secret.” Though sales may have been completed outside the U.S., the marketing in the U.S. amounted to domestic misappropriation.

When analyzing acts “in furtherance of misappropriation” to determine whether Motorola was entitled to damages on Hytera’s worldwide sales, the court held that an act “in furtherance of misappropriation” only needs to be commenced in the U.S. and does not need to be completed in the U.S. Thus, the court permitted Motorola to recover damages on Hytera’s worldwide sales.

More guidance on misappropriation can be found in Compulife Software, Inc. v. Newman, 111 F.4th 1147 (11th Cir. Aug. 1, 2024). Compulife, which had created software to generate life insurance quotes, sued a group of competitors for trade secret misappropriation. The competitors had allegedly acquired portions of Compulife’s secret database of insurance rates. The competitors used that database to create competing insurance quotes that ultimately led to a decline in Compulife’s sales. To obtain portions of Compulife’s secret database, the competitors copied the order of Compulife’s copyrighted code and used that code to deploy a “scraping” attack that acquired millions of variable-independent insurance quotes.

The Compulife court emphasized that misappropriation can occur when a person acquires a trade secret and knows or has reason to know that it was acquired by improper means. The U.S. Court of Appeals for the 11th Circuit held that, even though scraping may be “perfectly legitimate,” the competitors’ acts amounted to improper means because the competitors engaged in deceptive behavior. If they had not formatted and ordered their code exactly as Compulife did, they would not have been able to obtain the millions of quotes. The court compared the competitors’ acts to “surreptitious aerial photography,” not “innocent screenshots of publicly available site[s].”

The Compulife court further held that the competitors acquired Compulife’s trade secrets, even though it was unclear what percentage of Compulife’s database was actually taken. It was sufficient that the competitors obtained so much of the database to pose a competitive threat to Compulife. This case is pending appeal.

Based on these cases, marketing products that were developed with trade secrets can be a “use” establishing misappropriation. Marketing such products in the U.S. may even trigger liability for damages equal to worldwide sales. As to acquisition, trade secrets are acquired by improper means even if the manner of acquisition is not per se illegal. Deceptive or surreptitious means of acquisition can rise to misappropriation. And even if the owner of a trade secret cannot show that a competitor acquired the entirety of a trade secret, misappropriation may exist if a competitor acquires enough of a trade secret to pose a competitive threat.

6. Damages and Collections

It is no secret that high-dollar — sometimes billion-dollar — trade secret verdicts are growing more common. And with bigger verdicts come collection disputes. A 2024 federal court case from Massachusetts has both.

In Insulet Corp. v. EOFlow Co. Ltd., et al., a federal jury in Massachusetts awarded the largest ever verdict for claims brought under the DTSA. No. 23-11780, 2024 WL 5202755, at *1 (D. Mass. Dec. 23, 2024). Insulet Corp. was awarded over $452 million against South Korean medical device maker EOFlow for its misappropriation of trade secrets related to Insulet’s OmniPod device.

The dispute began in 2017 when EOFlow hired Insulet employees with intimate knowledge of the mechanics of the company’s OmniPod product, a first-of-its-kind wearable insulin pump that assists with the management of diabetes.

According to Insulet’s complaint, prior to these targeted hires, neither EOFlow nor any other competitor in the medical device space could replicate the functionality or effectiveness of the OmniPod for 20 years. Major players across the field allegedly attempted to develop rival products for years without success. According to Insulet, within just two years after Insulet’s former executives joined EOFlow, EOFlow unveiled an “EOPatch” that bore a striking resemblance to the OmniPod, physically and mechanically.

Insulet’s lawsuit alleged that this reversal in engineering fortunes was no accident but was the result of EOFlow obtaining trade secrets from Insulet’s former employees. Insulet claimed this misappropriation coincided with larger strategic efforts by EOFlow to leverage the ill-gotten knowledge, including signing a contract for “joint collaboration” with Insulet’s primary foreign manufacturer.

The jury agreed, finding that EOFlow had misappropriated four of Insulet’s trade secrets during the development and production of the EOPatch. The jury also found that three of these instances amounted to willful and malicious misappropriation and awarded $282 million in punitive damages on top of the $170 million disgorgement of EOFlow’s profits.

The case also serves as a reminder of the potential difficulties in collecting these large awards. Insulet filed a post-trial motion that accuses EOFlow of making contradictory claims about its ability to satisfy the judgement. In a request for post-verdict discovery, Insulet pointed to recent public statements made by EOFlow’s CEO, which, Insulet alleged, appear to acknowledge that the company has a serious liquidity problem while simultaneously hinting that it has received a mysterious influx of cash. The motion went so far as to suggest that EOFlow may be engaged in the improper concealment or transfer of funds to avoid enforcement of the award. In short, this case remains one to watch, with both sides facing the prospect of continued litigation over this landmark award.

For more information on this topic, see also “Ford Finds Key to Reversing $105 Million Award in Trade Secret Case.”


**This report is provided for information only and reflects the general opinions of the authors related to specific cases cited herein; the report does not constitute legal advice and may not reflect the opinions of the firm, its clients or the authors related to all cases.

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