Pelican Bay Forest Prods., Inc. v. W. Timber Prods., Inc.
297 Or.App. 417, 443 P.3d 651 (2019)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
A third party misappropriates a trade secret under the Uniform Trade Secrets Act by continuing to use the information after receiving notice that it was derived from a person who had a duty to maintain its secrecy. Information can qualify as a trade secret regardless of whether it is in a tangible or memorized form.
Facts:
- Doug Kelley worked for Pelican Bay Forest Products, Inc. (Pelican Bay) as a lumber sales trader for 14 years, developing a customer list based on information the company provided.
- In 2007, and again in 2013, Kelley signed acknowledgments of Pelican Bay's confidentiality policy, which stated that customer lists were the company's confidential property and could not be disclosed.
- As Kelley approached retirement, he provided his son-in-law, Andrew Hotmer, with a portion of his Pelican Bay customer list and other confidential information about those customers.
- Kelley assisted Hotmer in getting hired by Western Timber Products, Inc. (Western Timber), a competitor, by providing details about the customer list to Western Timber's president, Dan Seid.
- Western Timber hired Hotmer specifically because he had access to Pelican Bay's customer information.
- While still employed by Pelican Bay, Kelley began training Hotmer on how to use the customer list to make sales for Western Timber.
- After discovering the situation, Pelican Bay sent cease-and-desist letters to Western Timber, Hotmer, and Seid, informing them that the information was confidential.
- Western Timber refused to stop using the customer information, stating it did not believe Kelley's confidentiality agreement with Pelican Bay 'would hold up.'
Procedural Posture:
- Pelican Bay sued Western Timber, Seid, and Hotmer in an Oregon trial court for misappropriation of trade secrets, intentional interference with economic relations, and conversion.
- The defendants filed a motion for summary judgment on all claims.
- The trial court granted the defendants' motion for summary judgment, finding insufficient evidence that the defendants used 'improper means.'
- The trial court then awarded attorney fees to the defendants on the trade secrets claim, finding Pelican Bay's claim was made in bad faith.
- Pelican Bay appealed the trial court's grant of summary judgment on the trade secrets and intentional interference claims, as well as the attorney fee award, to the Court of Appeals of Oregon.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Does a company misappropriate a trade secret when it continues to use confidential customer information after being notified that the information was derived from a competitor's former employee who owed a duty to keep it secret?
Opinions:
Majority - Lagesen, J.
Yes, a company misappropriates a trade secret when it continues to use it after learning it was derived from someone with a duty of confidentiality. The court reasoned that under Oregon's Uniform Trade Secrets Act, ORS 646.461(2)(d)(C), misappropriation includes the 'use' of a trade secret by a person who, 'at the time of... use, knew or had reason to know' it came from someone who owed a duty of secrecy. Even if Western Timber was innocent when it first acquired the information, its continued use after receiving Pelican Bay's cease-and-desist letters, which put it on notice of Kelley's duty, could constitute misappropriation. The court also rejected the argument that information taken by memory cannot be a trade secret, finding no such limitation in the statute and holding that the form of the information is immaterial.
Analysis:
This decision clarifies that liability for trade secret misappropriation can attach to a third party at any point during their use of the secret, not just at the moment of initial acquisition. A recipient cannot claim 'innocent acquisition' as a perpetual defense if they are later put on notice that the information was improperly obtained and they continue to use it. This strengthens protections for trade secret holders by establishing a continuing duty on the part of users to cease use upon notice. The ruling also affirms the broad scope of the Uniform Trade Secrets Act, confirming that intangible, memorized information is as protectable as tangible data.
