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Buffets, Inc. v. Klinke

United States Court of Appeals, Ninth Circuit
73 F.3d 965 (1996)
ELI5:

Rule of Law:

Information qualifies for trade secret protection only if it possesses some novelty, derives independent economic value from its secrecy, is not readily ascertainable, and is subject to reasonable efforts to maintain its confidentiality.


Facts:

  • Buffets, Inc. (OCB), a national buffet chain, developed recipes and a 'small batch cooking' method.
  • The Klinkes, experienced restaurateurs, were denied an OCB franchise opportunity.
  • Paul Klinke approached an OCB employee, Jack Bickle, offering money for OCB recipes and a job for his son, Greg; Bickle refused.
  • Paul Klinke then collaborated with Mark Miller, a disgruntled former OCB manager.
  • Greg Klinke obtained a job as a cook at an OCB restaurant after concealing his identity and purpose on his application.
  • Miller hired an assistant to create training manuals that were 'almost exact copies of OCB position manuals.'
  • Miller also had OCB's recipes re-typed and delivered them to the Klinkes.
  • The Klinkes opened a competing restaurant, Granny's Buffet, using the copied OCB recipes and training manuals.

Procedural Posture:

  • Buffets, Inc. (OCB) sued Paul Klinke, et al., in the United States District Court for the Eastern District of Washington for misappropriation of trade secrets and violation of the Washington Consumer Protection Act.
  • The district court granted the Klinkes' motion for summary judgment on the Consumer Protection Act claim.
  • After a bench trial on the trade secret claims, the district court entered a final judgment in favor of the Klinkes.
  • The district court ruled that neither OCB's recipes nor its job manuals qualified for trade secret protection.
  • OCB (plaintiff-appellant) appealed the judgment to the United States Court of Appeals for the Ninth Circuit.

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Issue:

Do a buffet restaurant's recipes for common American dishes and its employee training manuals qualify as trade secrets under Washington law when the information is readily ascertainable and the company's efforts to maintain secrecy are minimal?


Opinions:

Majority - D.W. Nelson

No. Neither the recipes nor the employee training manuals qualify for trade secret protection under Washington law because they lack the requisite novelty and economic value derived from secrecy, and OCB failed to take reasonable measures to protect them. The court reasoned that the recipes were for 'basic American dishes' such as macaroni and cheese, which are unoriginal, readily ascertainable, and obvious. OCB failed to prove the recipes had independent economic value by not demonstrating a link between the recipes' secrecy and its commercial success. Regarding the training manuals, the court found OCB's efforts to maintain their secrecy were not reasonable, as employees were permitted to take them home and were not advised of their confidential nature. The court noted that information in the manuals, such as '[f]ollow each recipe exactly,' constituted common food service truisms, not protectable secrets. Therefore, even though the Klinkes obtained the information unethically, they could not be liable for misappropriating trade secrets because the information did not legally qualify as such.



Analysis:

This decision clarifies the high threshold for classifying common business information as a trade secret under the Uniform Trade Secrets Act. It establishes that merely compiling information, such as recipes for common dishes or standard operating procedures, does not automatically grant it trade secret status. The ruling emphasizes that for information to be protected, a plaintiff must demonstrate genuine novelty, economic value derived specifically from its secrecy, and, critically, active and reasonable efforts to maintain that secrecy. The case serves as a precedent cautioning businesses that they cannot claim trade secret protection for information they fail to treat as confidential or for ideas that are part of the general public domain.

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