In Direct Technologies, LLC v. Electronic Arts,
Inc., the Ninth Circuit set forth an interesting take on
what is sufficient to demonstrate reasonable efforts to maintain
secrecy under the California Uniform Trade Secrets Act
("CUTSA"). In the case, plaintiff Direct Technologies,
LLC asserted a trade secret misappropriation claim against
defendant Electronic Arts regarding the disclosure of its usb drive
prototype for Electronic Arts to a third-party. The district court
granted summary judgment for Electronic Arts, finding that no
reasonable jury could find that Direct Technologies had taken
reasonable efforts to maintain the confidentiality of its
The Ninth Circuit disagreed. While agreeing that "the
record shows that [Direct Technologies] did not do much, if
anything, to explicitly protect its prototype design," the
Ninth Circuit nevertheless declined to affirm the decision on that
basis. Citing the 1974 Ninth Circuit decision in Pachmayr Gun
Works, Inc. v. Olin Mathieson Chemical Corp., the Ninth
Circuit reasoned that there might be factual circumstances where an
"implied relationship of confidentiality exists between two
business partners," and thus, it could be reasonable not to
make any additional efforts to maintain the confidentiality of the
information at issue. One such circumstance, discussed in
Pachmayr and raised again here, is the disclosure of a
trade secret to a potential purchaser to enable the appraisal of
the object or information. Ultimately, the Ninth Circuit side
stepped the confidentiality issue and whether the enactment of
CUTSA preempted Pachmayr, by affirming the trade secret
judgment on the grounds that Direct Technologies had not
demonstrated any independent economic value for the prototype.
It will be interesting to see whether this case and the
potential of implied confidential relationships will alter the
landscape of summary judgment rulings on confidentiality issues in
CUTSA cases. Only time will tell.
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