The Supreme Court of Utah, in InnoSys, Inc. v. Mercer, held earlier this week that an employer making a prima facie case of trade secret misappropriation is entitled to a legal presumption of harm that, if unrebutted, supports a claim for trade secret misappropriation and at least injunctive relief. This August 31, 2015 decision interprets Utah’s Uniform Trade Secret Act and represents a useful precedent for companies relying on trade secret protection. It notably held that the presumption of harm attaches regardless of whether the record supports a threat of future disclosure or use of the stolen trade secrets.
The defendant was employed as an engineer with InnoSys. When her employment was terminated, she applied for unemployment benefits and in connection with an appeal of that benefits application, disclosed a confidential InnoSys business plan and confidential emails that she had taken. The confidential business plan in question was copied on a thumb drive on the day of her termination and removed from the premises, and the emails were forwarded from the confidential InnoSys server to defendant’s private Gmail account. InnoSys sued the defendant for trade secret misappropriation under Utah’s Uniform Trade Secret Act, and in the course of the lawsuit, defendant claimed that she had deleted all of the material that she had taken. Preliminary forensic examinations of her thumb drive and email account confirmed that some material had been deleted, but that certain confidential information remained potentially recoverable. On that record, the trial court found no showing of threatened future disclosure. As to the disclosure made in the context of the unemployment benefits proceeding, the trial court found that defendant’s “use of the InnoSys emails at the unemployment hearing … did no damage to InnoSys and did not create any threatened harm.” The trial court thus dismissed the lawsuit on summary judgment based on finding that there had been no showing of actual harm – notwithstanding that material protected as trade secrets had been taken. The trial court also awarded the defendant, as a prevailing party, attorneys’ fees, and sanctioned InnoSys.
The Supreme Court of Utah reversed the grant of summary judgment and the award of fees and sanctions, reinstating the misappropriation claim. In reversing, the Court found that InnoSys has asserted a prima facie case of trade secret misappropriation because there was no dispute on the summary judgment record that the defendant had misappropriated InnoSys material protected by the Uniform Trade Secrets Act. Specifically, the Court explained that “[t]he undisputed evidence shows that Mercer copied protected trade secrets onto her personal email account and thumb drive, allowing her to take those secrets with her after her employment ended.” The Court then held that, “under well-settled principles of trade secret law, InnoSys’s prima facie case gives rise to a rebuttable presumption of irreparable harm” that had not been rebutted. A dissenting opinion would have additionally conditioned this presumption on a further showing of risk of future disclosure, and on this basis, would have affirmed.
The InnoSys decision stands for the proposition that a prima facie case of trade secret misappropriation gives rise to an automatic, rebuttable presumption of harm, which if unrebutted, supports a cause of action for trade secret misappropriation and injunctive relief. Not only is it is binding authority in Utah, but it is potentially useful authority in other Uniform Trade Secret Act jurisdictions to support the prosecution of a trade secret misappropriation claim where, on the record available, the risk of future disclosure is unclear or unknown.