It is a long standing principle in trade secret law that “[a] trade secret can exist in a combination of characteristics and components, each of which, by itself, is in the public domain, but the unified process, design and operation … [makes it] a protectable secret.” Imperial Chem. Indus. v. Nat’l Distillers & Chem. Corp., 342 F.2d 737, 742 (2d Cir. 1965).

In a recent decision, the United States Court of Appeals for the Fourth Circuit reaffirmed protection of combination trade secrets in a case brought by software company AirFacts Inc., a developer and licensor of software around ticket price algorithms and audits, against a former employee for breach of contract and trade secret misappropriation. The trade secrets at issue involved two flowcharts displaying ticket prices rules derived from information in the public domain. In a bench trial, the Maryland district court ruled that the flowcharts contained public information and were widely available to AirFacts’ employees, and thus, these documents were not trade secrets under the Maryland Uniform Trade Secret Act (“MUTSA”).  The Fourth Circuit disagreed, ruling that the flowcharts were protectable trade secrets and remanded the case back to the lower court to determine if the defendant misappropriated those documents. AirFacts Inc. v. Amezaga, No. 17-2092 (4th Cir. 2018).

The Fourth Circuit’s decision rested on three key points:

 

  • The evidence at trial demonstrated that the information was not readily ascertainable to outsiders because defendant compiled the information in particular groupings and applied his expertise to create the flowcharts.
  • The defendant’s painstaking, expert arrangement of the data made the flowcharts inherently valuable separate and apart from the publicly available contents.
  • Plaintiff took reasonable steps to protect the flowcharts’ “confidential status outside of the normal scope of their restricted use within AirFacts’ business” and granted only “a few” employees access to the flowcharts. This case is a valuable reminder that trade secret protections can extend to a combination of information that is itself in the public domain.