On December 20, 2024, Justice Cohen of the New York County Commercial Division issued a decision in SkyX Group Inc v. Foundation for a Smoke Free World, 2024 NY Slip Op. 34550(U), holding that the plaintiff failed to state a misappropriation of trade secrets claim because, among other things, it failed adequately to allege the steps taken to keep the information secret, explaining:
To state a claim for misappropriation of trade secrets a plaintiff must demonstrate: (1) that it possessed a trade secret and (2) that the defendants used that trade secret in a breach of a confidential relationship or duty. A trade secret is any formula, pattern, device or compilation of information which is used in one’s business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. In deciding a plaintiff’s trade secret claim, courts will consider:
(1) the extent to which the information is known outside of [the] business; (2) the extent to which it is known by employees and others involved in [the] business, (3) the extent of measures taken by the business to guard the secrecy of the information; (4) the value of the information to the business and its competitors; (5) the amount of effort or money expended by the business in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.
What these considerations demonstrate is that a trade secret must first of all be secret. Whether information is secret is generally a question of fact.
Here, affording the complaint a liberal construction, Plaintiffs fail to allege a viable cause of action for misappropriation of trade secrets primarily because they fail to allege that they had any trade secrets. While Plaintiffs allege that their proposals were developed internally and based on personal experience and not publicly available data, they fail to sufficiently allege that there were proper measures taken to ensure the information was kept secret. While Plaintiffs allege that they took steps to maintain confidentiality within SkyX by limiting access to the full proposals and requiring contractors to sign Non-Disclosure Agreements, they failed to keep the approaches and methodologies secret when they emailed the December Proposal to FSFW without any protections or confidentiality markings. In voluntarily emailing the December Proposal without any confidentiality or security measures, the Plaintiffs released their methods and approaches in the Proposals from any trade secret protection. This surrendering of trade secret protection would then also encompass the purported trade secrets within the February Proposal as it was just a fine-tuning of the December Proposal.
(Internal quotations and citations omitted).