Illinois Court Examines Trade Secrets Act and Inevitable Disclosure Doctrine In Suit Over Employee Wellness Health Program

The plaintiff workplace wellness program developer sued under the Illinois Trade Secrets Act in Destiny Health, Inc. v. Cigna Corporation, 2015 IL App (1st) 142530, alleging a prospective business partner pilfered its confidential data.

Affirming summary judgment for the defendants, the First District appeals court asked and answered some prevalent trade secrets litigation questions.

The impetus for the suit was the plaintiff’s hoped-for joint venture with Cigna, a global health insurance firm.  After the parties signed a confidentiality agreement, they spent a day together planning their future business partnership.  The plaintiff provided some secret actuarial and marketing data to Cigna to entice the firm to partner with plaintiff.  Cigna ultimately declined plaintiff’s overtures and instead teamed up with IncentOne – one of plaintiff’s competitors.  The plaintiff sued and claimed that Cigna incorporated many of plaintiff’s program elements into Cigna’s current arrangement with IncentOne.  The trial court granted Cigna’s motion for summary judgment and plaintiff appealed.

Held: Affirmed.

Rules/Reasons:

On summary judgment, the “put up or shut up” moment in the lawsuit, the non-moving party must offer more than speculation or conjecture to beat the motion.  He must point to evidence in the record that support each element of the pled cause of action.  In deciding a summary judgment motion, the trial court does not decide a question of fact.  Instead, the court decides whether a question of fact exists for trial.  The court does not make credibility determinations or weigh the evidence in deciding a summary judgment motion.

The Illinois Trade Secrets Act (765 ILCS 1065/1 et seq.) provides dual remedies: injunctive relief and actual (as well as punitive) damages for misappropriation of trade secrets.  To make out a trade secrets violation, a plaintiff must show (1) existence of a trade secret, (2) misappropriation through improper acquisition, disclosure or use, and (3) damage to the trade secrets owner resulting from the misappropriation. (¶ 26)

To show misappropriation, the plaintiff must prove the defendant used the plaintiff’s trade secret.  This can be done by a plaintiff offering direct (e.g., “smoking gun” evidence) or circumstantial (indirect) evidence.  To establish a circumstantial trade secrets case, the plaintiff must show (1) the defendant had access to the trade secret, and (2) the trade secret and the defendant’s competing product share similar features.  (¶ 32)

Another avenue for trade secrets relief is where the plaintiff pursues his claim under the inevitable disclosure doctrine.  Under this theory, the plaintiff claims that because the defendant had such intimate access to plaintiff’s trade secrets, the defendant can’t help but (or “inevitably” will) rely on those trade secrets in its current position.  However, courts have made clear that the mere sharing of exploratory information or “preliminary negotiations” doesn’t go far enough to show inevitable disclosure.

Here, there was no direct or circumstantial evidence that defendant misappropriated plaintiff’s actuarial or financial data.  While the plaintiff proved that defendant had access to its wellness program components, there were simply too many conceptual and operational differences between the competing wellness programs to support a trade secrets violation.  These differences were too stark for the court to find misappropriation. (¶ 35)

Plaintiff also failed to prove misappropriation via inevitable disclosure.  The court held that “[a]bsent some evidence that Cigna [defendant] could not have developed its [own] program without the use of [Plaintiff’s] trade secrets,” defendant’s access to plaintiff’s data alone was not sufficient to demonstrate that defendant’s use of plaintiff’s trade secrets was inevitable.  (¶¶ 40-42).

Afterwords:

A viable trade secrets claim requires direct or indirect evidence of use, disclosure or wrongful acquisition of a plaintiff’s trade secrets;

Access to a trade secret alone isn’t enough to satisfy the inevitable disclosure rule.  It must be impossible for a defendant not to use plaintiff’s trade secrets in his competing position for inevitable disclosure to hold weight;

Preliminary negotiations between two businesses that involve an exchange of sensitive data likely won’t give rise to an inevitable disclosure trade secrets claim where the companies aren’t competitors and there’s no proof of misappropriation.  To hold otherwise would stifle businesses’ attempts to form economically beneficial partnerships.

 

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PaulP

Litigation attorney at Kanaris Stubenvoll & Heiss, P.C. representing businesses and individuals in post-judgment enforcement, collections and real estate litigation.