The Fifth Circuit held last week that a potential contractor’s revelation of a choice between options doesn’t necessarily a trade secrets misappropriation claim make.
The case involved a dispute between CQ, Inc., and TXU Mining Co., L.P., over TXU’s solicitation of help for cleaning lignite coal. CQ applied for a TXU lignite-cleaning contract. CQ won first place standing. But TXU never inked a deal.
CQ sued for, among other things, theft of trade secrets. It alleged that its suggestion of cleaning run-of-mine (ROM) lignite instead of “waste” lignite revealed in confidence to TXU a protectible trade secret.
The Fifth Circuit, applying Texas law, upheld dismissal of the misappropriation claim. It said:
The ROM strategy does not qualify as a trade secret under Texas law. As defined by CQ, the “ROM strategy” was CQ’s recommendation that TXU focus on cleaning ROM lignite instead of waste lignite at the Twin Oak Mine. CQ does not allege that the ROM strategy itself involved a previously unknown process or method for cleaning lignite. In fact, the record indicates that TXU contemplated cleaning ROM lignite when it sent its initial request for bids. The ROM strategy was essentially a strategic recommendation between two generally known alternatives. While this recommendation may have been based on CQ’s valuable experience and effort, it was not a “process or device for continuous use” that offered TXU an advantage over its competitors. See [RESTATEMENT OF
TORTS § 757, cmt. b. (1939)]. Moreover, the record indicates that the recommendation was tailored to TXU’s initial cleaning project, not to the mining industry generally. See id . (explaining that a trade secret “is not simply information as to single or ephemeral events”). Accordingly, the ROM strategy was not a trade secret under Texas law, and the district court did not err in granting summary judgment against CQ’s misappropriation claim.
CQ Inc. v. TXU Mining Co. L.P., No. 07-11134, slip op. at 8 (5th Cir. Apr. 9, 2009) (applying Texas law).
Blawgletter says, ah — a strategic recommendation that tells you something you could already know doesn’t count as a trade secret. But the pre-existing awareness by TXU of the ROM option made all the difference. Ah.