The facts of the case are fairly complicated. Each of the two individual defendants had at various times worked in differing capacities for the plaintiff’s predecessor company. In 1999, one of the individual defendants left employment with the plaintiff’s predecessor company while still in possession of arguably trade secret backup materials (which he and/or some of the other defendants may have helped develop). He then worked for a competitor until returning to work for the plaintiff company for a few months in 2004. He was never asked to return the trade secret materials of the plaintiff’s predecessor and did not arguably begin to use those materials to benefit the defendant company until 2006 -- 7 years after he last worked for the plaintiff’s predecessor and about 8 years before the lawsuit was filed. Meanwhile, the former president of the plaintiff’s predecessor (who was also an individual defendant employed by the defendant company) testified that he was aware that the other individual defendant still had the arguably trade secret materials in his possession in 1999 and never requested their return before he was fired by the plaintiff company in 2004 and before he formed the defendant company in 2006.
The Court’s analysis
was fairly straightforward:
Under OUTSA, a
plaintiff may recover damages from a party that misappropriated the plaintiff’s
trade secrets. Ohio Rev. Code § 1333.63(A). “Misappropriation” is defined in
the statute as the “[a]cquisition of a trade secret of another by a person who
knows or has reason to know that the trade secret was acquired by improper
means”; or the disclosure or use of another’s trade secret without the other’s
consent, if the discloser/user acquired it by improper means, in breach of a
duty of secrecy, or with the knowledge that it was a trade secret and had been
acquired by accident or mistake. Ohio Rev. Code § 1333.61(B). “Improper means” include
“theft, bribery, misrepresentation, breach or inducement of a breach of a duty
to maintain secrecy, or espionage through electronic or other means.” Ohio Rev.
Code § 1333.61(A). An action must be brought “within four years after the
misappropriation is discovered or by the exercise of reasonable diligence should
have been discovered.” Ohio Rev. Code § 1333.66.
The Court noted that
the statute of limitations generally does not begin to run until the plaintiff
suffers an injury, and does not begin to run under the discovery rule until the
plaintiff discovers or reasonably should have discovered that it has been
injured. The trial court concluded that
the statute began to run when the plaintiff’s predecessor company knew – or reasonably
should have known – that the individual defendant had “unlawfully
acquired, disclosed, or used its trade secret information.” The president of the plaintiff’s predecessor
admitted that he knew the individual defendant had retained the trade secret
information in 1999 and did not ask for their return even when the defendant
went to work for a competitor of the plaintiff’s predecessor. Therefore, the trial court had concluded
that the plaintiff’s predecessor had knowledge of the misappropriation
approximately eight years before the lawsuit was filed.
The Sixth Circuit rejected this analysis because there was disputed
evidence that the individual defendant had properly acquired the trade secret
information in 1999 (based on a convincing argument on the merits asserted by
the defendants). Indeed, the individual
defendant convincingly argued that he had the plaintiff’s predecessor’s consent
to retain the information in 1999. As
noted by the Sixth Circuit:
In other words, in an attempt to demonstrate that [the
plaintiff’s] substantive claim of trade secret misappropriation lacked merit,
defendants introduced evidence that fatally undermined their statute of
limitations argument.
. . ..
.
Had [the trial court] viewed the evidence in the light most
favorable to [the plaintiff]– evidence introduced, ironically enough, by [its]
adversary – no cause of action for misappropriation could have arisen in 1999
because evidence in the record supports a finding that [the individual
defendant] did not acquire the shop drawings in breach of any duty or by other
improper means.
Therefore, there was no undisputed issue of fact that the
materials had been misappropriated more than four years before the lawsuit was
filed since the defendant arguably had consent to retain them in 1999. (Remember the statute of limitations is an
affirmative defense for which the defendant bears the burden of proof). Moreover, there was no undisputed issue of
fact on the misappropriation claim because the plaintiff remarkably argued that
the defendants conspired to take the information in 1999 with plans to use it
six years later and that the defendants did not have permission to ever use the materials even if they arguably
had permission in 1999 to retain them. Thus, a plausible argument existed that the
materials were not misappropriated until 2006 when the defendants first began
to use them in competition against plaintiff.
All this being said, the parties must now go to trial on the issues instead of having them resolved on a motion. There has been no finding on liability.
NOTICE:
This summary is designed merely to inform and alert you of recent legal
developments. It does not constitute legal advice and does not apply to any
particular situation because different facts could lead to different results.
Information here can change or be amended without notice. Readers should not
act upon this information without legal advice. If you have any questions about
anything you have read, you should consult with or retain an employment
attorney.
