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Competitive Use Of Trade Secrets Not Necessary For Liability

Published by on February 14, 2012

On January 13, 2012, the Supreme Court of Virginia reviewed an appeal from the Circuit Court of Fairfax County regarding an employment agreement that included a non-disclosure provision.  The Court held that the Virginia Trade Secrets Act does not require competitive use of a stolen trade secret for liability under the Act.  More after the […]

On January 13, 2012, the Supreme Court of Virginia reviewed an appeal from the Circuit Court of Fairfax County regarding an employment agreement that included a non-disclosure provision.  The Court held that the Virginia Trade Secrets Act does not require competitive use of a stolen trade secret for liability under the Act.  More after the break.

Plaintiff Geographic Services, Inc. (“GSI”) filed suit against Anthony Collelo and the Boeing Company, Autometric, Inc., alleging breach of contract, tortious interference with contract, and violations of the Virginia Uniform Trade Secrets Act. 

In 2006, GSI hired Collelo and trained him to perform specialized geonames work.  This work exposed him to GSI’s confidential information trade secrets.  Upon his employment, Collelo entered into an employment contract with GSI, which included non-competition, non-disparagement, non-solicitation, and non-disclosure provisions.  The non-disclosure provision prohibited Collelo from disclosing GSI’s confidential information “to any person or entity without first obtaining [GSI’s] written consent.”  The non-solicitation provision prohibited Collelo from attempting to perform any “conflicting services for a customer or…contractor of [GSI’s]” for a period of one year after Collelo’s employment with GSI ended. 

Collelo left GSI in 2008 and was hired by Boeing to work in a non-geonames capacity.  In June 2008, GSI learned that, despite his contractual obligations, Collelo was performing geonames work at Boeing.  This lawsuit at the Circuit Court followed.

The trial court found that GSI had established the existence of trade secrets, but it declined to rule on whether the defendants misappropriated GSI’s trade secrets.  The trial court granted the defendants’ motion to strike and dismissed GSI’s entire case with prejudice, reasoning that Boeing and GSI are not in direct competition.  The court concluded that GSI had not lost business, and Boeing had not made money based on the trade secrets Collelo acquired because Boeing had not acquired the trade secret to do the work for which the trade secret was designed. 

The Virginia Supreme Court reversed the trial court’s decision, ruling that the Virginia Trade Secrets Act does not require competitive use of a stolen trade secret.  In pertinent part, the court stated that “the Trade Secrets Act does not require that one who is accused of misappropriating a trade secret use the allegedly misappropriated trade secret to compete with the holder of the trade secret.”  Thus, it was sufficient that GSI demonstrated at trial that defendants had misappropriated its trade secret through the use of expert testimony.  The evidence also demonstrated that Boeing was aware of Collelo’s obligations to GSI, yet it still permitted Collelo to perform geonames work, asked Collelo to improve Boeing’s geonames work, and asked Collelo to train other Boeing employees to perform geonames work. 

In regards to GSI’s other claims, the Virginia Supreme Court agreed that the evidence presented at trial was not sufficient to prove damages in regards to breach of contract or tortious interference.  Thus, the trial court did not err in striking those claims. 

Justice McLanahan, concurring in part and dissenting in part, argued that the trial court reached the right conclusion regarding the Virginia Trade Secrets Act because GSI failed to present evidence about damages.  Because GSI failed to prove actual loss or damages, it failed to establish a case to survive the motion to strike and go before the jury. 

For the full opinion, click here.

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