MicroStrategy, Inc. v. Business Objects, S.A.
2004 U.S. Dist. LEXIS 18228, 331 F.Supp.2d 396, 2004 WL 1794934 (2004)
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Rule of Law:
Under the Virginia Uniform Trade Secrets Act (VUTSA), information constitutes a trade secret if it derives independent economic value from not being generally known and is subject to reasonable efforts to maintain its secrecy. Misappropriation occurs through the improper acquisition, disclosure, or use of such a trade secret.
Facts:
- MicroStrategy, Incorporated and Business Objects, S.A. were direct competitors in the high-end business intelligence software market.
- MicroStrategy required all employees to sign confidentiality agreements and implemented physical and network security measures to protect its proprietary information, which it considered its most valuable asset.
- On March 20, 2000, MicroStrategy announced a major restatement of its past earnings, causing its stock price to collapse and leading to significant employee layoffs and instability.
- Between March 2000 and December 2001, Business Objects hired at least seventeen former MicroStrategy employees, many from the same Chicago office.
- While still a MicroStrategy employee in March 2001, Thomas Papp, a top salesperson, sent a confidential MicroStrategy competitive analysis document to his future superior at Business Objects.
- On April 12, 2001, while still technically a MicroStrategy employee, Papp gave a presentation to Business Objects staff on MicroStrategy's proprietary selling techniques, which Business Objects' CEO subsequently directed his executive team to implement.
- Another departing employee, John Ennis, transferred numerous confidential MicroStrategy documents to his personal email and then onto his Business Objects computer, including technical specifications, target account lists, and customer pricing information.
- Corey Sommers, a former MicroStrategy employee working in competitive intelligence at Business Objects, obtained and circulated several highly sensitive MicroStrategy documents, including the "Business Objects Competitive Recipe" (a playbook on how to compete against Business Objects) and MicroStrategy's internal volume discount schedule.
Procedural Posture:
- MicroStrategy Incorporated sued Business Objects, S.A., and Business Objects Americas, Inc. in the U.S. District Court for the Eastern District of Virginia (a federal trial court).
- The complaint alleged two primary claims: tortious interference with business and misappropriation of trade secrets.
- The tortious interference claim was tried before a jury.
- Following the presentation of MicroStrategy's evidence, the court granted Business Objects' motion for judgment as a matter of law, effectively dismissing the tortious interference claim before it reached the jury.
- The misappropriation of trade secrets claim was decided by the judge in a bench trial.
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Issue:
Did Business Objects misappropriate MicroStrategy's trade secrets in violation of the Virginia Uniform Trade Secrets Act by acquiring and using confidential information obtained from former MicroStrategy employees?
Opinions:
Majority - Friedman, District Judge
Yes, in part. Business Objects misappropriated certain specific trade secrets, but not all of the confidential information it acquired constituted a trade secret under the Virginia Uniform Trade Secrets Act (VUTSA). To prevail, a plaintiff must prove two elements for each specific piece of information: (1) that it constitutes a trade secret, and (2) that it was misappropriated. A trade secret must derive economic value from its secrecy and be subject to reasonable efforts to maintain that secrecy. The court found that MicroStrategy’s “Business Objects Competitive Recipe” and its “Volume Discount Schedule” met this standard. The Competitive Recipe was a highly sensitive strategic playbook with immense economic value, its distribution was limited, and it was not readily ascertainable. The Volume Discount Schedule contained confidential pricing information that would give a competitor a significant advantage. The court found that Business Objects misappropriated these secrets through improper acquisition and subsequent use and disclosure within the company. However, the court found other information did not qualify as trade secrets. For example, a CEO’s internal email about restructuring was too general and mostly public, and the “new way of selling” was comprised of techniques that were too generic or readily ascertainable by asking customers. For the many documents taken by employee John Ennis, the court found no evidence that Business Objects itself used or disclosed them, and therefore, while Ennis's actions were improper, liability for misappropriation could not be imputed to the company for those specific items.
Analysis:
This decision provides a detailed application of the Virginia Uniform Trade Secrets Act, demonstrating the highly fact-specific and item-by-item analysis courts undertake in such cases. It establishes that not all confidential or proprietary company information rises to the level of a legally protected trade secret. The ruling clarifies the distinction between an employee's permissible use of general skills and knowledge versus the impermissible transfer of specific, economically valuable secret documents. Furthermore, it highlights that for corporate liability to attach, mere acquisition of a trade secret by a new employee is insufficient; the new employer must have used, disclosed, or improperly acquired the information, for instance, by actively soliciting it.
