IP Law Daily, TRADE SECRETS—WDOhio: Epoxy Manufacturer Denied Preliminary Injunction on Trade Secrets Claims Against Former Employees, Competitor, (Apr 19, 2013)

By William Zale, J.D.

Epoxy manufacturer Dayton Superior (Superior) was denied a preliminary injunction on trade secrets claims against two former employees and Epoxy Products Co. (Epco), the federal district court in Dayton has ruled (Dayton Superior Corp. v. Yan, April 18, 2013, Rose, T.).

Michael Klover was employed in sales and Julian Yan was employed as a chemist by Superior and before that by Unitex, which had been acquired by Superior. Superior alleged misappropriation of trade secrets against Klover, Yan, and Epco and breach of a noncompetition agreement against Yan.

Under Ohio’s Uniform Trade Secrets Act, actual or threatened misappropriation of a plaintiff’s trade secrets may be enjoined. To prevail on a misappropriation of trade secrets claim, a plaintiff must show (1) that a trade secret exists; (2) that the defendant acquired the trade secret as a result of a confidential relationship; and (3) that the defendant engaged in unauthorized use of the trade secret.

Customer information and product information identified by Superior were likely to constitute trade secrets because the information derived independent economic value from not being generally known to other persons and was the subject of efforts that were reasonable under the circumstances to maintain its secrecy, the court found. Both Klover and Yan signed a Confidential Information and Inventions Agreement and a Conflict of Interest Agreement with Superior, which banned the disclosure of trade secrets. During employment with Unitex and Superior, Klover was acquired customer-related trade secrets and Yan acquired product-related trade secrets, as a result of confidential relationships.

Superior, however, was unlikely to succeed on the merits of its trade secrets claims because it failed to establish unauthorized use. Under Ohio law, Ohio Rev. Code §1333.61(B), the misappropriation of a trade secret means (1) the acquisition of a trade secret by one with knowledge that acquisition was improper or (2) the disclosure or use of a trade secret by one who used improper means to acquire knowledge of the trade secret or had knowledge of improper acquisition by another. Under the “inevitable disclosure rule,” when applicable, a former employee working for a competitor will be enjoined because an individual cannot compartmentalize a competitor’s knowledge and disclosure or misappropriation of trade secrets is inevitable.

Klover testified that he emailed customer and price lists to himself because he needed the information for a trade show and for the calculation of commissions owed to him by Superior. He also testified that the information contained in these emails did not give him a competitive advantage. The use of this information by Klover was not improper, the court determined. Although Klover was working for EPCO, the “inevitable disclosure rule” was applicable because he did not have a noncompetition agreement with Superior and did not currently have timely, sensitive, strategic and/or technical information belonging to Superior that posing a serious threat to its business.

There was no evidence that the epoxy formulas that Yan proved to EPCO were Superior’s, the court found, although Yan’s actions could be considered misappropriation if the epoxy formulas that he provided to EPCO were based upon knowledge he gained while at Unitex and Superior. Yan is a degreed chemist who had 10 years of experience in the epoxy industry before coming to Unitex, including regularly creating epoxy formulas. While at a prior employer, Yan created a spreadsheet to assist him in creating epoxy formulas. To create the epoxy formulas that he provided to EPCO, Yan relied on his general knowledge about epoxy products and used the spreadsheet that he had developed.

A noncompete agreement with Unitex expired in 2011. Because Superior did not prove that Yan used this technical information to pose a serious threat to Superior’s business, the “inevitable disclosure rule” did not apply to Yan regarding his provision of epoxy formulas to EPCO in early 2012, and Superior did not shown, for purposes of a preliminary injunction, that Yan misappropriated its product-related trade secrets, the court determined.

EPCO could not be found to have misappropriated Superior’s trade secrets, in light of the findings as to Klover and Yan, according to the court.

Because Superior had no enforceable noncompete agreement in place when Yan provided the epoxy formulas to EPCO, Superior did not show, for purposes of a preliminary injunction, that it would succeed on the merits of its noncompete claim against Yan.

The case is No. 3:12-cv-380.

Attorneys: Christine M. Haaker (Thompson Hine) for Dayton Superior Corp. Robert D. Shank (Denlinger, Rosenthal & Greenberg Co., LPA) for Julian Z. Yan. Grant Spencer Cowan (Frost Brown Todd LLC) for Michael R. Klover.

Companies: Dayton Superior Corp.; Epoxy Products Co., LLC

Cases: TradeSecrets OhioNews