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Employee Wellness Company’s Trade Secrets Claim Against Business Partner Fails – IL Appeals Court Says

January 27, 2016

 

The plaintiff workplace wellness program developer sued under the Illinois Trade Secrets Act in Destiny Health, Inc. v. Cigna Corporation, 2015 IL App (1st) 142530, after it accused a prospective business partner pilfered its confidential data.

 

Affirming summary judgment for the defendants, the First District appeals court asked and answered some important questions that often arise in trade secrets litigation.

 

The impetus for the suit was the plaintiff’s hoped-for joint venture with Cigna, a global health insurance firm.  After the parties signed a confidentiality agreement, they spent a day together planning their future business partnership.  The plaintiff provided some secret actuarial and marketing data to Cigna to hopefully motivate it to partner with the plaintiff.  Cigna ultimately declined plaintiff’s overtures and instead joined up with IncentOne – one of plaintiff’s competitors.  The plaintiff sued on the theory that Cigna incorporated many of plaintiff’s secret wellness program elements into its current arrangement with IncentOne program.  The trial court granted Cigna’s motion for summary judgment and plaintiff appealed.

 

Affirming the trial court, the appeals court labeled summary judgment the “put up or shut up” moment in the lawsuit when the non-moving party must offer more than speculation or conjecture to beat the motion.  Instead, the summary judgment opponent must point to tangible evidence in the record to support each element of the cause of action.  In deciding a summary judgment motion, the trial court does not decide a question of fact.  Instead, the court decides whether a question of fact exists for trial.  The court does not make credibility determinations or weigh the evidence in deciding a summary judgment motion.

 

The Illinois Trade Secrets Act (765 ILCS 1065/1 et seq.) provides dual remedies: injunctive relief and actual (as well as punitive) damages for misappropriation of trade secrets. 

 

To establish a trade secrets violation, a plaintiff must show (1) existence of a trade secret, (2) misappropriation through improper acquisition, disclosure or use, and (3) damage to the trade secrets owner resulting from the misappropriation. (¶ 26)

 

To show misappropriation, the plaintiff must prove the defendant used the plaintiff’s trade secret.  This can be done by a plaintiff offering direct (e.g., “smoking gun” evidence) or circumstantial (indirect) evidence.  To establish a circumstantial trade secrets case, the plaintiff must show (1) the defendant had access to the trade secret, and (2) the trade secret and the defendant’s competing product share similar features.  (¶ 32)

 

Another avenue for trade secrets relief is where the plaintiff pursues his claim under the inevitable disclosure doctrine.  Under this theory, the plaintiff claims that because the defendant had such intimate access to plaintiff’s trade secrets, the defendant can’t help but (or “inevitably” will) rely on those trade secrets in its current position.  However, courts have made clear that the mere sharing of exploratory information or “preliminary negotiations” don’t go far enough to show inevitable disclosure.

 

Here, there was no direct or circumstantial evidence that defendant misappropriated plaintiff’s actuarial or financial data.  While the plaintiff proved that defendant had access to its wellness program components, there were simply too many conceptual and operational differences between plaintiff’s workplace wellness program and the one ultimately developed by Cigna and IncentOne to support a trade secrets violation.  These stark wellness program differences were too glaring for the court to find misappropriation. (¶ 35)

 

Plaintiff also failed prove misappropriation via inevitable disclosure.  The court held that “[a]bsent some evidence that Cigna [defendant] could not have developed its [own] program without the use of [Plaintiff’s] trade secrets,” defendant’s access to plaintiff’s data alone was not sufficient to demonstrate that defendant’s use of plaintiff’s trade secrets was inevitable.  (¶¶ 40-42).

 

Afterwords:

 

A viable trade secrets claim requires direct or indirect evidence of use, disclosure or wrongful acquisition of a plaintiff’s trade secrets;

 

Access to a trade secret alone isn’t enough to satisfy the inevitable disclosure rule.  It must be impossible for a defendant not to use plaintiff’s trade secrets in his competing position for inevitable disclosure to hold weight;

 

Preliminary negotiations between two businesses contemplating a future business relationship that involve an exchange of sensitive data likely won’t give rise to an inevitable disclosure trade secrets claim where the companies aren’t competitors and where there is no proof of misappropriation.  To hold otherwise, would stifle businesses’ attempts to form economically beneficial partnerships.

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