In a recent Mecklenburg County Superior Court decision, Judge Bledsoe dismissed the Plaintiffs’ trade secret misappropriation claims because they failed to specifically identify what they were trying to protect and they failed to allege they had taken sufficient measures to protect the information.
In Krawiec v. Manly, the Plaintiffs were the owners and operators of a dance studio called Happy Dance. Between 2009 and 2011 Happy Dance hired two dancers to work for their studio. Happy Dance claimed that the dancers had signed employment agreements, but interestingly enough could not produce a signed copy of any such agreement.
The Plaintiffs claimed the dancers agreed to work for Happy Dance exclusively, i.e. not to work for anyone else while employed with Happy Dance. They also claimed there was an agreement between Happy Dance and the dancers that prevented the dancers from disclosing Happy Dance’s “confidential information” to outside parties. When Happy Dance found out that its dancers were working for other studios while still working for Happy Dance, they sued their dancers and accused them of taking confidential and trade secret information about Happy Dance’s “ideas and concepts for dance productions, marketing strategies and tactics, and student, client, and customer information” to their new employer.
While only assessing whether the complaint made the types of allegations that constitute a claim under North Carolina law , the Court decided that Happy Dance had properly pled the existence of valid employment agreements between the dance company and each of the dancers. However, the Court dismissed the trade secret misappropriation claims because they did not meet the required pleading standards.
The North Carolina Trade Secrets Protection Act allows individuals and businesses to protect commercially valuable information that is not readily available to the public or otherwise easily obtained through other means as long as the owners of that information take reasonable measures to ensure the secrecy of the information.
To maintain such a claim, the Plaintiffs were required to identify the information they wanted to protect with enough specificity that the Court would be able to determine if the information had been misappropriated and what information was being protected. Unfortunately, the Plaintiffs made a common error in these types of cases in that they listed broad categories of information in their complaint instead of listing specific pieces of information or documents that contained specific pieces of information. In addition, the Court concluded that the Plaintiffs did not allege they had taken measures reasonable under the circumstances to protect the information. The Plaintiffs alleged that there was a confidentiality agreement in place, but made no other mention of efforts to keep the information secret. The mere existence of a confidentiality agreement was not enough to meet the required pleading standard.
The only obligation the Court was made aware of with respect to the information the Plaintiffs wanted to protect was an alleged obligation preventing the dancers from disclosing “confidential information”. The Court concluded in light of these allegations that the Plaintiffs still did not make specific allegations that they took measures to protect this information. As a result, it seems the Court is signaling that a mere confidentiality provision in an employment agreement would not by itself be a sufficient measure to protect the secrecy of the information.
Confidentiality by definition pertains to disclosing information to people that are not supposed to have the information. Trade secret status goes well beyond confidentiality in that it forbids someone in possession of trade secret information from possessing or using the information, as well as disclosing it to a third party.
Oftentimes employers have information they would like to prevent employees from taking out of the door when they leave; however, unless precautions taken before a dispute arises, trade secret claims will generally fail. Waiting until after a falling out has occurred is the wrong time to try to protect your valuable business information.
Whether you are trying to protect information you have spent years developing or you are an employee accused of trade secrete misappropriation, consult with an experienced professional regarding you individual needs rather than trying to handle a dispute on your own.