Synopsys, Inc. v. Risk Based Security, Inc.
PUBLISHED (2023)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
To establish that information constitutes a trade secret under federal or Virginia law, a plaintiff must present evidence that each alleged secret derives independent economic value from its confidentiality. Evidence of the overall value of the company or a product containing the alleged secrets is insufficient to satisfy this burden without a specific connection demonstrating the value is derived from the secrecy itself.
Facts:
- Risk Based Security, Inc. (RBS), a cybersecurity company, developed a private database of software vulnerabilities called 'VulnDB' by enhancing a publicly available database with its own research.
- In 2014, RBS entered into a license agreement allowing a competitor, Black Duck Software, Inc., to use VulnDB.
- Synopsys, Inc. acquired Black Duck in 2017.
- While the license was active, Black Duck began developing its own vulnerability databases.
- In 2018, RBS revoked Black Duck's license, believing Black Duck had misappropriated VulnDB content to build its own products.
- In March 2021, Synopsys became a CVE Numbering Authority (CNA), a role involving the public identification and cataloging of software vulnerabilities.
- Following this announcement, RBS sent Synopsys a cease and desist letter alleging that Synopsys's work as a CNA would involve the use of misappropriated VulnDB data and demanded it stop.
- In January 2022, while the litigation was pending, RBS was acquired by another company, Flashpoint.
Procedural Posture:
- In 2018, RBS sued Black Duck in Massachusetts state court.
- In late 2021, RBS amended its Massachusetts complaint to add Synopsys as a defendant.
- In April 2021, Synopsys filed a declaratory judgment action against RBS in the U.S. District Court for the Eastern District of Virginia.
- During discovery, RBS issued a covenant not to sue Synopsys for its CNA activities and moved to dismiss the case as moot, but the district court denied the motion.
- The parties filed cross-motions for summary judgment.
- The district court granted Synopsys' motion to exclude testimony from two of RBS's expert witnesses.
- The district court granted summary judgment for Synopsys, declaring it had not misappropriated trade secrets, and denied RBS's motion for partial summary judgment.
- RBS, as the appellant, appealed the district court's final judgment to the U.S. Court of Appeals for the Fourth Circuit.
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 plaintiff's evidence of its overall company value and revenue from a product containing alleged trade secrets satisfy the statutory requirement that each trade secret has 'independent economic value' derived from its secrecy?
Opinions:
Majority - Agee, Circuit Judge
No. A plaintiff fails to establish that its information constitutes a trade secret when it presents only general evidence of its corporate value without connecting that value to the secrecy of the specific alleged trade secrets. To qualify as a trade secret under both the Defend Trade Secrets Act and the Virginia Uniform Trade Secrets Act, information must (1) derive independent economic value from not being generally known and (2) be the subject of reasonable efforts to maintain its secrecy. RBS failed to present sufficient evidence of the first element for its 75 alleged trade secrets. Its evidence, consisting of the company’s acquisition price and revenue derived from its VulnDB product, does not demonstrate the value of the specific alleged trade secrets themselves, nor does it establish that any such value derives from their secrecy. Allowing evidence of the value of the whole company to substitute for evidence of the value of its component parts would improperly circumvent the plaintiff's burden of proof. The court also affirmed the exclusion of expert testimony that similarly relied on the overall value of RBS and VulnDB rather than assessing the alleged trade secrets individually.
Analysis:
This decision significantly clarifies the evidentiary requirements for proving the 'independent economic value' element of a trade secret claim. It establishes that plaintiffs cannot rely on broad, high-level valuation evidence of a company or an entire product to prove the value of specific, constituent trade secrets. The ruling heightens the burden on plaintiffs to produce granular, particularized evidence that directly links economic value to the confidentiality of each alleged secret. Consequently, future trade secret litigants will need to present more sophisticated financial analyses and expert testimony to survive summary judgment, making it more difficult to protect information without concrete proof of the competitive advantage derived specifically from its secrecy.
