Trade Secrets “reasonable measures” for Safeguarding: Second Circuit Weighs In
In Turret Labs USA, Inc. v. CargoSprint, LLC (“Turret”), the Second Circuit highlighted the importance of trade secret holders taking specific steps under the Defend Trade Secrets Act, 18 U.S.C § 1836(b) (the “DTSA”) for information with potential value to be legally protected.
According to the Court, the DTSA gives scant guidance on what constitutes “reasonable measures” to keep information secret. But given that trade secrets may appear in a wide variety of “forms and types,” § 1839(3), “[w]hat measures are `reasonable’ must depend in significant part on the nature of the trade secret at issue,” see Exec. Trim Constr., Inc. v. Gross, 525 F. Supp. 3d 357, 380 (N.D.N.Y. 2021). We agree with the district court that where an alleged trade secret consists “primarily, if not entirely,” of a computer software’s functionality — “functionality that is made apparent to all users of the program” — the reasonableness analysis will often focus on who is given access and on the importance of confidentiality and nondisclosure agreements to maintaining secrecy. Turret Labs, 2021 WL 535217, at *4; see also Mason v. Amtrust Fin. Servs., Inc., 848 F. App’x 447, 450 (2d Cir. 2021) (holding that plaintiff’s failure to “execut[e] a nondisclosure or licensing agreement or . . . stipulate[e] in his employment contract that the [software] was his proprietary information” evidenced that he “had not taken reasonable measures to protect his information”); Inv. Sci., LLC v. Oath Holdings Inc., №20 Civ. 8159, 2021 WL 3541152, at *3 (S.D.N.Y. Aug. 11, 2021) (concluding that the plaintiff did not employ reasonable measures to protect its claimed trade secrets because, among other reasons, the plaintiff “concede[d] that it did not require [the defendant] to sign a confidentiality agreement before sharing the contents of the [product]”); Exec. Trim, 525 F. Supp. 3d at 380; Charles Ramsey Co., Inc. v. Fabtech-NY LLC, №1:18-CV-0546, 2020 WL 352614, at *15 (N.D.N.Y. Jan. 21, 2020) (collecting cases); Mintz v. Mktg. Cohorts, LLC, №18-CV-4159, 2019 WL 3337896, at *6 (E.D.N.Y. July 25, 2019) (dismissing a DTSA claim because plaintiff “did not require defendants to sign a non-disclosure agreement nor any sort of covenant to protect the passwords”).
Turret, thus, points to the advisability of licensors and other owners of trade secret information, in an effort to take DTSA-related “reasonable measures,” putting into place robust written nondisclosure instruments to be executed by permitted users thereof.
Do you possess valuable trade secrets that you hope to commercialize or monetize? If so, contact us to schedule an introductory consultation with Castle Garden Law.
Ted Amley
Managing Attorney
With more than two decades of experience, Ted Amley has advised on hundreds of complex business, finance, and employment matters. His background includes roles at Cravath, Richards Kibbe, and Dentons, along with in-house experience at Morgan Stanley, Blackstone, and UBS. Now leading his own practice, Ted represents individuals, companies, funds, and institutions across sectors such as tech, real estate, healthcare, AI, ecommerce, and finance – offering strategic counsel on
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