Can we bring a misappropriation claim over information this contract was supposed to keep confidential, and does it have to be a trade secret?
Yes, if the information meets North Dakota's Uniform Trade Secrets Act definition, and a claim labelled "misappropriation" is read against that Act's own definitions. N.D.C.C. § 47-25.1-01 defines a "trade secret" as information "that: - Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and - Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy." "Misappropriation" is defined in the same section, reaching acquisition "by a person who knows or has reason to know that the trade secret was acquired by improper means" and disclosure or use "without express or implied consent" by a person in one of several defined states of knowledge, with "[i]mproper means" defined to include "theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means." N.D.C.C. § 47-25.1-02(1) then gives injunctive relief for a violation: "Actual or threatened misappropriation may be enjoined. Upon application to the court, an injunction must be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time to eliminate commercial advantage that otherwise would be derived from the misappropriation." McColl Farms, LLC v. Pflaum confirms the scope of a "misappropriation" claim is narrow: the trial court's dismissal rested on the premise that "misappropriation is a cause of action that relates exclusively to the wrongful acquisition or disclosure of a trade secret under N.D.C.C. § 47-25.1-01." The Supreme Court affirmed that dismissal on a different ground, that the corporate and limited-liability-company remedies the plaintiff relied on did not reach a defendant who "was not a corporate officer, director, manager, or governor of the company," so the premise was left standing rather than adopted.
The trap
McColl Farms shows a plaintiff cannot use the label "misappropriation" to reach conduct that is really conversion, embezzlement, or another tort just because the money or property taken had value: the trial court dismissed a misappropriation claim as redundant of a conversion claim on exactly that reasoning, and the Supreme Court's review did not disturb the premise that misappropriation under the Act is confined to trade secrets as § 47-25.1-01 defines them. A confidentiality or non-disclosure clause protecting information that does NOT meet the Act's two-part definition (independent economic value from secrecy, plus reasonable efforts to keep it secret) gets no relief from this Act at all: the contract's own confidentiality promise, not the UTSA, is what would have to carry that protection. The Act says as much itself: it "displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret," but it "does not affect" "[c]ontractual remedies, whether or not based upon misappropriation of a trade secret." The confidentiality clause is not merely the fallback, it is expressly preserved.
6 authorities
- statuteN.D.C.C. § 47-25.1-01enactment date not established
The words that state the rule
"Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: - Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and - Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
- statuteN.D.C.C. § 47-25.1-02enactment date not established
The words that state the rule
Actual or threatened misappropriation may be enjoined. Upon application to the court, an injunction must be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time to eliminate commercial advantage that otherwise would be derived from the misappropriation. - In exceptional circumstances, an injunction may condition future use upon payment of a reasonable royalty for no longer than the period of time for which use could have been prohibited. Exceptional circumstances include a material and prejudicial change of position prior to acquiring knowledge or reason to know of misappropriation that renders a prohibitive injunction inequitable. - In appropriate circumstances, affirmative acts to protect a trade secret may be compelled by court order.
The words that state the rule
The court dismissed McColl Farms’ misappropriation claim stating misappropriation is a cause of action that relates exclusively to the wrongful acquisition or disclosure of a trade secret under N.D.C.C. § 47-25.1-01, the allegations are the same as those for the conversion claim, the allegations are redundant, and North Dakota law does not recognize a claim for misappropriation.
The words that state the rule
Pflaum was not a corporate officer, director, manager, or governor of the company, and therefore this case is different from Thompson, and the statutory provisions do not apply. We conclude the court did not err in dismissing McColl Farms’ misappropriation claim.
- statuteN.D.C.C. § 47-25.1-01enactment date not established
The words that state the rule
"Improper means" includes theft, bribery, misrepresentation, breach or inducement of a breach of a duty to maintain secrecy, or espionage through electronic or other means. - "Misappropriation" means: - Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or - Disclosure or use of a trade secret of another without express or implied consent by a person who: - Used improper means to acquire knowledge of the trade secret; - At the time of disclosure or use, knew or had reason to know that the person's knowledge of the trade secret was: - Derived from or through a person who had utilized improper means to acquire it; - Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or - Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or - Before a material change of the person's position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.
- statuteN.D.C.C. § 47-25.1-07enactment date not established
The words that state the rule
Except as provided in subsection 2, this chapter displaces conflicting tort, restitutionary, and other law of this state providing civil remedies for misappropriation of a trade secret. - This chapter does not affect: - Contractual remedies, whether or not based upon misappropriation of a trade secret; - Other civil remedies that are not based upon misappropriation of a trade secret; or - Criminal remedies, whether or not based upon misappropriation of a trade secret.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.