Illinois Lawyer’s Practice Management Software Qualifies for Trade Secret Protection

Geraci v. Amidon, 2013 IL App (2d) 120023-U, exhaustively analyzes Illinois trade secrets law in the context of a pitched battle between two competing law firms and their respective practice management software programs. 

The plaintiff, a bankruptcy attorney whose ubiquitous television presence is likely familiar to most Chicagoland viewers, sued a former employee and competing bankruptcy firm under the Illinois Trade Secrets Act, 765 ILCS 1065/1 (ITSA) claiming the former employee pilfered the plaintiff’s secret  practice management software and used it while working for the competing firm. 

Defendants argued that the software was an independent creation of the former employee’s and wasn’t a trade secret.  The trial court granted summary judgment for defendants.

Result: Trial court reversed.

Reasoning:

The Second District held that plaintiff raised a genuine issue of fact on his trade secrets claim sufficient to defeat summary judgment.

An Illinois trade secrets plaintiff must show (1) the existence of a trade secret, and (2) use of that secret by the defendant in the defendant’s business. 

To establish that information is a trade secret, a plaintiff must demonstrate that the information is sufficiently secret to provide economic value to the trade secret’s holder, is not within the realm of general knowledge and skills of a given industry, and that the information can’t be readily duplicated without major time, effort and monetary expense.   ¶ 76; 765 ILCS 1065/2(d). 

A claimed trade secret doesn’t have to rise the level of a protected patent and computer software can qualify as a trade secret under Illinois law. ¶ 77.

The Court held that plaintiff produced sufficient evidence that the software was a trade secret and that defendants used that program in their competing business.

On the “sufficiently secret” trade secrets prong, the Court pointed to plaintiff’s evidence that the software was the first of its kind in the industry and there were no comparable programs when plaintiff developed it in the late 1980s. 

The Court also found that plaintiff’s software had economic value based on plaintiff’s affidavit testimony that the program was the “single most important aspect” of running his law firm and that he developed the software over two decades and at an expense of several million dollars.  Geraci ¶¶ 80, 83.

The Second District also found that plaintiff offered enough evidence that he tried to keep the software secret; citing as examples plaintiff requiring employees to sign confidentiality agreements, preventing employees from taking the software code off-site, password-protecting firm computers and sequestering the firm server in a locked room.  ¶¶ 5-51, 79.  Taken together, these efforts adequately demonstrated plaintiff’s efforts to maintain the software’s secrecy to survive defendants’ summary judgment motion. 

Plaintiff also offered enough evidence that defendants misappropriated the software. program under trade secrets law.  

Misappropriation means disclosure or use of another’s trade secret without express or implied consent ¶ 85, 765 ILCS 1065/2(b)(2)(B)(ii).  Plaintiff’s expert witness testified that there were too many similarities between the competing software programs to be a mere coincidence.   The defendant also admitted that he regularly took copies of plaintiff’s program home with him while employed by plaintiff.  This was at least circumstantial evidence of misappropriation to raise a contested fact question for a later trial.  ¶ 96.

Take-aways:  Tedious (at times) technical analysis aside, Geraci provides a thorough synopsis of the key elements and factors which govern the prosecution and defense of a trade secrets case.  The case illustrates the quantum of evidence needed to establish the existence of a trade secret and that it was impermissibly used by a defendant. 

The case also shows how expensive it is to state a colorable trade secrets case and that, at least in the context of warring software programs, how crucial it is to have a computer expert’s testimony to support a trade secrets claim.  Without detailed expert testimony on the similarities between the two competing software programs, it’s clear that plaintiff would have lost his trade secrets claim.

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PaulP

Litigation attorney at Fisher Kanaris, P.C. representing businesses and individuals in all types of commercial disputes.