The Eleventh Circuit ruled that the functions of a software program for tracking packages were not trade secrets.
Plaintiff Warehouse Solutions Inc. (WSI) is a logistics company. In 1998, the companyâs founder developed a software program called Intelligent Audit that interfaces with UPS and FedEx tracking systems.
WSI hired Scott Langley and his company to help sell the program.
Defendant Integrated Logistics LLC (ILL) is also a logistics company. After seeing a demo of Intelligent Audit, ILL hired Langley and began reselling the program under the name âShipLink,â paying WSI a transaction fee for each parcel audited. However, WSI and ILL never had a written agreement.
WSIâs founder told ILL verbally that the program was âhighly confidential and proprietaryâ and told ILL not to share it with anyone outside of ILL, other than with customers who had signed a confidentiality agreement.
Without WSIâs knowledge, ILL hired a developed to create its own tracking program that was similar to Intelligent Audit. Once this was done, ILL stopped doing business with WSI.
WSI sued ILL, alleging misappropriation of trade secrets, among other causes of action.
A district court granted summary judgement to ILL on the trade secret claims, finding that:
Intelligent Audit was not a trade secret âbecause the programâs visible output (i.e., interactive screen displays) was readily apparent to users of the software,â and WSI did not make reasonable efforts to maintain the programâs âsecrecy.â
The court found that verbal warnings about the confidential nature of the program were not reasonable under the circumstances to keep the programâs output secret, and that there was no evidence that WSI required ILL to sign a confidentiality agreement.
The district court also âdrew a distinction between a software programâs underlying source code, which may be a trade secret, and the programâs âlook and feelâ and âfunctionality,â which cannot.â
The court of appeals affirmed the lower courtâs decision.
A verbal confidentiality agreement is not worth the paper it is (not) printed on. Just because you say something is a trade secret, that does not necessarily make it one.
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Photo Attribution: “Modern warehouse with pallet rack storage system” by Axisadman – Own work. Licensed under CC BY-SA 3.0 via Wikimedia Commons.