Third Circuit: Ownership is not necessary for trade secret claim

| Sep 22, 2020 | Intellectual Property Litigation |

Most business owners in New Jersey understand that a trade secret or a patent can be regarded as an asset of the business. As such, a logical corollary of this conclusion is that a lawsuit about the ownership or infringement of a trade secret must involve the owner of the secret. Three circuit courts, including the Third Circuit which includes New Jersey, have reached the opposition conclusion.

The issue

The issue turns on the way trade secrets are used in commerce. Trade secrets are often licensed by the original owner to a subsidiary holder for a use approved by the original owner of the trade mark. Both original owners and licensees have more likely than not invested money in the development of the trade secret, and both the original holder and a licensee of the secret have a recognizable right to protect their investments.

The Third Circuit decision

The Third Circuit Court of Appeals reached this conclusion in the recent decision in Advanced Fluid Sys., Inc. v. Huber, No. 19-1722, 2020 WL 2078298 (3rd Cir. Apr. 30, 2020). The defendant Huber stole confidential information from the plaintiff, his employer and attempted to sell it to a competitor. The information included one more trade secrets that Advanced Fluid had licensed from the original owner of the secret. The Court of Appeals found that the evidence of secret theft was a “sorry story of disloyalty and deception piled upon deception.” As a licensee of the secret information, Advanced Fluid had standing to sue the former employee for damages for violation of the Uniform Trade Secret Act.

Conclusion

This decision does not have direct application to New Jersey because it was based upon Pennsylvania’s version of the Uniform Trade Secrets Act, but Federal courts in New Jersey would be obligated to follow the reasoning of the court in the Advanced Fluid case. Anyone who may be interested in how this decision may affect their intellectual property, including licenses trade secrets, may wish to consult an experienced intellectual property attorney for a review of their trade secrets and patents, and the extent they may be protected by New Jersey’s Uniform Trade Secrets Act.

 

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