Ownership: Not Necessary to Launch Trade Secrets Claim into Litigation

An ex-employee’s attempt to take confidential rocket-related information from his former employer blasted into litigation that provides further clarification on the definition of a trade secret and whether a plaintiff must own the information to make a claim under a state’s uniform trade secrets act. ABA Litigation Section leaders say that the decision serves as an important reminder for practitioners to closely analyze issues of ownership and possession when addressing the application of state trade secret laws to proprietary commercial information.

An Employee Lifts Hydraulic Information

In Advanced Fluid Systems, Inc. v. Huber, an employee of Advanced Fluid Systems, Inc. (AFS), allegedly downloaded confidential information related to a hydraulic system from the company’s server to use for his own benefit. AFS had developed the information under a contract with the Virginia Commercial Space Flight Authority (VCSFA), which operated a NASA rocket launch facility. Pursuant to the contract, AFS ceded legal ownership of the confidential information to VCSFA. But AFS stamped the information as confidential and proprietary, and stored it on its own computers, which the employee had access to.

A new entity called Orbital acquired control of the launch system from VCSFA. Orbital bid out work for the system. The employee allegedly fed some of AFS’s proprietary information to one of AFS’s competitors to help it secure work from Orbital. The employee also formed his own company and allegedly used AFS’s proprietary information to secure his own contract with Orbital for work on the launch system.