The Software IP Report

Trade Secret Misappropriation Claim Dismissed Where Plaintiff Failed to Prove Damage

By Robert Billings

Categories: The Software IP Report, Trade Secrets

An element of a claim of trade secret misappropriation is that the theft has caused damage, a lesson reinforced by the defendant’s successful motion for summary judgment in 3PD, Inc. v. U.S. Transport Corp., Case No.: GJH-13-2438 (D. Md. July 9, 2015). Even if trade secrets were wrongly taken by the defendant, the plaintiff failed to demonstrate actual damages under the Maryland Uniform Trade Secret Act (“MUTSA”).

The plaintiff, 3PD, Inc., is a logistical support company with a nationwide customer data base comprised largely of major consumer product retailers. Rose was a manager in charge of supervising and organizing all of 3PD’s centralized customer dispatching and routing for Lowe’s Home Centers. Rose gave 3PD 12 days’ notice of his resignation to take a position with the defendant, one of 3PD’s competitors. During that time, Rose forwarded “to his personal e-mail account confidential 3PD information that 3PD contends was trade secret.” That information included price and task sheets, budgets, forecasts, meeting notes, scheduling methods, and contact information. 3PD terminated Rose upon discovering his activities.

Without analyzing whether the information that Rose downloaded to his personal e-mail account was included trade secrets, the court concluded that 3PD did not adequately demonstrate it suffered damages under the MUTSA. 3PD stated that it would provide damages indicating lost profits and costs associated with the loss of customer accounts taken over by the defendant. However, 3PD had not in any way substantiated this claim. Despite the fact that discovery had been closed for fourteen months, 3PD never supplemented responses to interrogatories requesting an itemized accounting of economic damages claimed. 3PD’s Director of Client Solutions stated in a deposition that she “was not aware” of any business lost from Lowe’s, or from any other of its clients “as a result of Defendant’s conduct.” The court also noted that 3PD never retained an expert to “evaluate the nature and/or extent of its damages.”

3PD conceded that it had not demonstrated any actual loss, but contended that the MUTSA does not require it “to prove actual damages as an element” of its claim. The court agreed; the MUTSA allows a trade secret plaintiff to recover damages for “unjust enrichment caused by misappropriation,” or a “reasonable royalty” for unauthorized disclosure or use of a trade secret. However, in this case, 3PD had not alleged, much less adduced any evidence, that the defendant was unjustly enriched or that 3PD was entitled to a reasonable royalty. 3PD “never raised this theory” in any of its complaints or discovery materials. 3PD could not add this new theory of damages in opposition to a motion for summary judgment.