US Court Dismisses Action for Misappropriation of Trade Secrets

On September 12, 2011, the US District Court for the Eastern District of California (Court) denied a motion for a preliminary injunction brought by the plaintiff, Agency Solutions.com, LLC (Agency), asserting that the defendant Trizetto Group Inc (TGI) had misappropriated its trade secrets under California Civil Code §3426 et seq by incorporating 26 of Agency’s trade secrets into its software. Agency and TGI entered into an agreement to develop “Quote to Card”, an integrated software product designed to perform the front and back end functions of administering health insurance claims. The agreement was terminated before the project was complete, and Quote to Card was never launched. However, TGI later marketed a product with similar functionality, resulting in Agency’s launching an action against TGI. The central question was whether Agency alleged sufficient facts to show a high likelihood of success in its claims against TGI. Chief District Judge Ishii found that Agency did not, primarily because TGI claimed protection over the general knowledge, ideas and designs underlying the interface between the front and back ends of healthcare insurance programs, but not the particular information that disclosed the trade secret itself. The court applied the following principle from Silvaco Data Systems v Intel Corp (2010): “While source code is undoubtedly a trade secret, the way the source code works when compiled and run is not.” For a link to the court’s decision, visit: http://tinyurl.com/3pm3ko6 Summary by: Darren Hall