Fifth Circuit Clarifies the Evidentiary Burden Required of Plaintiffs Alleging Misappropriations of Trade Secrets

Ashley Graves, Law Clerk

The Court of Appeals for the Fifth Circuit recently emphasized the importance of evidence showing the actual “misuse” of another’s trade secrets in disputes over the same.  The Court’s August 9, 2022 decision, CAE Integrated, LLC v. Moov Technologies, Inc.,[1] reaffirmed that businesses and employers who believe that their trade secrets have been wrongfully appropriated and misused must be able to present evidence of actual misconduct, rather than just drawing inferences based on an employee’s or competitor’s future successes.

CAE Integrated, L.L.C. – Background

CAE Integrated, L.L.C. (“CAE”) filed suit against its former employee and competitor, Nicholas Meissner and Moov Technologies, Inc. (“Moov”), respectively, for misappropriation of trade secrets under the federal Defend Trade Secrets Act and Texas’ version of the Uniform Trade Secrets Act.[2]  Mr. Meissner’s employment contract contained a non-disclosure provision protecting CAE’s “proprietary information,” which included its “customers and suppliers and other nonpublic information that ha[d] commercial value.”

Mr. Meissner used his personal computer for work and used Google Drive to transfer and store work files, some of which contained photographs of equipment and purchase agreements.  Files saved on his computer were placed in a folder that synced to his Google Drive.  In 2016, CAE provided its employees with new computers and Mr. Meissner gave his personal computer to CAE so it could wipe any remaining CAE files.  During this time, CAE took a ‘snapshot’ of the computer, as it was then-configured, and that snapshot was stored on the computer’s secondary drive.

CAE fired Mr. Meissner two years later and Mr. Meissner signed a separation agreement.  As part of the agreement, Mr. Meissner affirmed that he had returned all company property, including documents stored in his personal email or cloud storage accounts.  Mr. Meissner then requested that his personal computer be returned to him after any CAE’S files had been removed.  However, instead of permanently deleting the files from Mr. Meissner’s old computer, CAE merely moved them to Google Drive’s trash bin.  Weeks later, Mr. Meissner discovered the files in the Google Drive trash folder and restored their content.

Subsequently, Mr. Meissner began working at Moov and again affirmed that he had not retained and would not use CAE’s data.  Before starting his new position, Mr. Meissner checked his Google Drive account and deleted any documents he believed could contain CAE’s data.  However, within a year and a half after Mr. Meissner started his new job, Moov secured millions of dollars in investments and thousands of listings for equipment, totaling over $1 billion.  CAE believed Moov had some kind of “head start,” and, based on the outdated snapshot of the contents of Mr. Meissner’s old computer (which reflected CAE documents stored on Google Drive, which had since been deleted), CAE sued Mr. Meissner and Moov for misappropriation of trade secrets and sought a preliminary injunction against both parties.

The Lawsuit

CAE alleged that Mr. Meissner misappropriated transactional documents and customer lists via Google Drive.  Mr. Meissner testified that he had not had access to his computer containing the disputed files since 2016, and that his Google Drive did not contain the documents.  Forensics revealed that the only overlap between Moov’s files and the 2016 Google Drive snapshot was two publicly-available files from third parties. Additionally, the Court found that the Google Drive contained no customer lists when Mr. Meissner began his employment with Moov. Thus, the Court found that the trial court did not err in finding that CAE had failed to establish that its former employee and Moov had access to its trade secrets.

Importantly, the Court went further and found that, even if CAE had established that Mr. Meissner or Moov had misappropriated trade secrets, CAE failed to show the use or potential use of CAE’s trade secrets.  CAE unsuccessfully argued that Mr. Meissner’s and Moov’s knowledge of some of CAE’s customers, coupled with Moov’s rapid success, demonstrated by implication a misappropriation of trade secrets.  In other words, CAE contended that the ‘“use’ of [its] data can reasonably be inferred from Moov’s results.”[3]  However, the Court indicated that this sort of evidence is insufficient to establish liability for misappropriation.  Relatedly, the Court did not find that CAE had established a likelihood of threatened future use of the alleged misappropriated trade secrets since neither Mr. Meissner nor Moov had access to any documents previously saved on the Google Drive.

Key Takeaways

CAE Integrated, LLC serves as a cautionary tale for businesses seeking injunctive relief or damages for alleged trade secret misappropriations when such actions are based chiefly on assumptions, or a “where there is smoke, there is fire” mentality.  Rather, potential misappropriation of trade secret plaintiffs must have evidence demonstrating that the employee or competing employer not only had knowledge of the disputed information, but also accessed the disputed information to the detriment of the trade secret’s owner.

[1] CAE Integrated, L.L.C. v. Moov Technologies, Inc., 44 F.4th----, 2022 WL 3210358 (5th Cir. Aug. 9, 2022)

[2] The Colorado Uniform Trade Secrets Act is substantively the same as the Texas Uniform Trade Secrets Act. Compare Colo. Rev. Stat. §§ 7-74-101 et seq. with Tex. Civ. Prac. & Rem. Code §§ 134A.001 et seq.  

[3] CAE Integrated, L.L.C., 2022 WL 3210358, at *4 (emphasis in original).