IP Law Daily, TRADE SECRETS—4th Cir.: Insurance company revives trade secrets claim, employees allegedly took software to start business, (Nov 19, 2025)

By Cathleen Calhoun, J.D.

“After all, what does one do with a stolen competitive pricing software except ‘use’ it?”

Reversing a district court’s dismissal of an insurance company and its affiliates’ Defend Trade Secrets Act (DTSA) claim against employees, the Fourth Circuit determined that the company and affiliates pled facts sufficient to plausibly allege that their trade secrets were misappropriated and were not required to do more. Several employees had begun preparations to create a corporate entity to compete with the company using its proprietary software, even though they had all signed an employment contract that included a confidentiality agreement and invention provision. The Fourth Circuit found that at this stage in the proceedings, the company only needed to plausibly allege that the employees misappropriated their trade secret, and that the software was covered by the employees’ confidentiality provision (SamuelSherbrooke Corporate, Ltd. v. Mayer, No. 24-2173 (4th Cir. Nov. 18, 2025)).

The company and its affiliates exclusively insured nursing homes and other entities of one company, as a “captive” insurer.

Proprietary software. One employee, the insurance company’s Chief Technology Officer (CTO), was tasked with designing, creating, and maintaining proprietary software for the exclusive use of the company and its affiliates According to the complaint, the proprietary software enabled the company and its affiliates to, among other things, incorporate and utilize medical records to project and predict risk values in pricing individual covered incidents more effectively. It was also used to more accurately price insurance contracts for both existing and potential customers to provide competitive and profitable insurance policies for the company and its customers, while also providing additional services that produced economic value due to its secrecy and proprietary nature.

DTSA. To state a viable DTSA claim, a plaintiff must plausibly allege that: (1) it owns a trade secret; (2) the trade secret was misappropriated; and (3) the trade secret implicates interstate or foreign commerce. Pursuant to the DTSA, information is a trade secret if its owner: (1) “has taken reasonable measures to keep [it] secret;” and (2) it “derives independent economic value.”

Trade secret. The district court had found that the company and its affiliates failed to plausibly allege they took reasonable measures to protect the secrecy of the proprietary software. On appeal, the company and its affiliates argued that they sufficiently plead the secrecy element because they pled that the employees were required to sign the employment contract which included a confidentiality agreement and invention provision. The Fourth Circuit agreed that the pleadings sufficiently connected the confidentiality agreement and invention provision to the proprietary software.

Reasonable measures. The employees argued that even if such a connection were made, the existence of a confidentiality provision alone is insufficient as a matter of law to demonstrate reasonable efforts to maintain secrecy. The court disagreed, noting that trade secrets take many forms and what may constitute “reasonable measures” must be considered in light of the nature of the trade secret and the context in which it exists. “At the pleading stage, then, it is sufficient that Appellants allege they protected the Proprietary Software by requiring employees to sign the confidentiality agreement and Invention Provision contained in the employment contract,” the court found.

Misappropriation. Having found that the company and its affiliates plausibly alleged the existence of a trade secret, the court turned to the question of whether they plausibly alleged that the employees misappropriated it. The employees argued that the complaint did not because, in their view, the complaint only included a single conclusory allegation that they “[are] actively using” the proprietary software to operate their new competing insurance company. However, other allegations within the complaint, including how the employees would be directly competing with them, were found much more than the bare allegation of “use.” The court determined that the allegations together told the story of the alleged misappropriation. The court noted, “After all, what does one do with a stolen competitive pricing software except ‘use’ it, as alleged in this case, to assist with operating this new competing insurance entity?”

The case is No. 24-2173.

Attorneys: Dylan Michael Bensinger (McGuireWoods) for Samuel Sherbrooke Corp., Ltd., and Samuel Goldner. Scott Elliot Bayzle (Parker Poe Adams & Bernstein) for Gabriel Mayer, Beau Walker, Joseph Matthew Queen and Helios Risk Solutions, LLC.

Companies: Samuel Sherbrooke Corp., Ltd.; Helios Risk Solutions, LLC

MainStory: TopStory TechnologyInternet TradeSecrets MarylandNews NorthCarolinaNews SouthCarolinaNews VirginiaNews WestVirginiaNews