Trade Secret Law and Compilations of Information
“About the author: Scott Lesowitz is a cum laude graduated of Harvard Law School and a former Assistant U.S. Attorney. His practice is located in Beverly Hills, California. His e-mail address is scott@syversonlaw.com.”
A compilation of information in which the individual pieces of information are publicly available may qualify as a trade secret. A sufficiently unique, useful, and valuable compilation of information might qualify as a legally protected trade secret even though the individual pieces of information would not merit trade secret protection.
In the Uniform Trade Secrets Act, a “compilation” is listed as an example of the type of information that may qualify as a trade secret. Uniform Trade Secrets Act § 1(4); California Civil Code § 3426.1(d). However, the Act also requires that for information to constitute legally protected trade secrets, the information must not be “generally known” and must be economically valuable because of its secrecy. Uniform Trade Secrets Act § 1(4)(i); California Civil Code § 3426.1(d). Trade secret law does not protect all proprietary information.
On November 20, 2018, the federal Fourth Circuit Court of Appeals, addressed the trade secret status of compilations in AirFacts, Inc. v. de Amezaga, 909 F.3d 84 (4th Cir. 2018). In AirFacts, a former employee used his credentials (that were apparently not deactivated) to download flow charts that contained large amounts of publicly available data relating to airline pricing. The former employee argued that since the flowcharts were merely overviews of publicly available information, the flowcharts could not contain legally protected trade secrets.
However, the Court of Appeals rejected this argument. The Court of Appeals held that the information as specifically compiled and displayed in the flowcharts constituted a legally protectable trade secret. This was even though the individual pieces of data in the flowcharts were not trade secrets. The compiler of the information had spent months compiling the data, grouping the data, and working to display the data in a useful format. AirFacts, 909 F.3d at 96.
The court cited law that, “The fact that individual pieces of information claimed to be confidential are available to the general public does not defeat a claim of confidentiality if the value of the information stems from its compilation or collection in a single place or in a particular form which is of value…The effort of compiling useful information is, of itself, entitled to protection even if information is otherwise generally known.” Id. (internal quotations omitted).
California courts and the Ninth Circuit Court of Appeals have followed the underlying rationale and legal principles contained in the AirFacts case. Courtesy Temporary Service, Inc. v. Camacho, 222 Cal.App.3d 1278 (1990) (discussing compilation of customer data); United States v. Nosal, 844 F.3d 1024, 1041-44 (9th Cir. 2016). See also ReadyLink Healthcare v. Cotton, 126 Cal.App.4th 1006, 1017-21 (2005) (discussing a wide variety of data, some publicly available).
As the Uniform Trade Secrets has been adopted nearly everywhere in the United States, decisions such as AirFacts are persuasive authority in California. This is especially the case here in which California case law agrees with the general legal foundations.