Lack of independent economic value dooms claim

Where one company claimed a competitor misappropriated its trade secrets, but failed to adduce evidence showing its 75 alleged trade secrets met the independent economic value requirement, the competitor prevailed on the claim.

Background

Both Risk Based Security Inc., or RBS, and Synopsys Inc., identify vulnerabilities in the source code of software and share information about those vulnerabilities so they can be corrected before nefarious individuals exploit them. After RBS accused Synopsys of engaging in unlawful conduct related to the content of RBS’ vulnerability database, Synopsys filed this declaratory judgment action.

In relevant part, Synopsys sought a judicial declaration that it had not misappropriated RBS’ trade secrets. On the merits, the district court granted Synopsys’ motion for summary judgment on that claim after concluding that RBS had not come forward with evidence showing that any of its alleged trade secrets satisfied the statutory definition of that term.

Mootness

RBS asserts that “in reliance on” certain representations made during the pretrial proceedings, it covenanted not to sue Synopsys and withdrew its cease-and-desist letter. It urged that the case be dismissed as moot because these documents “conclusively end[ed] this litigation.” The district court disagreed and declined to dismiss the declaratory judgment action.

This court concludes that RBS did not meet its “formidable burden” by unilaterally withdrawing the cease-and-desist letter and covenanting not to sue. This is so for at least three reasons. First, the complaint’s broader background and prayer for relief addressed a dispute larger than Synopsys’ specific role as a CNA, and the covenant not to sue and withdrawal letter only partially addressed the entire dispute.

Second, the language of the covenant not to sue and the withdrawal letter were vaguely conditioned on Synopsys’ future performance and thus did not make it “absolutely clear” that RBS’ “allegedly wrongful behavior could not reasonably be expected to recur.” Third, and relatedly, because RBS’ unilateral change relied on certain conditions about how Synopsys undertook its role as a CNA, the withdrawal letter and covenant not to sue were revocable at its discretion and thus fell further short of the high benchmark.

Merits

The district court concluded RBS failed to come forward with proof that could show that the 75 alleged trade secrets satisfied both statutory requirements — independent economic value and reasonable secrecy. The court’s conclusions on the merits of RBS’ trade secrets claims rested in part on its exclusion of testimony from RBS’ expert witnesses, observing that they had improperly incorporated “legal conclusions, speculation, or factual narrative” into their written reports.

Having reviewed the record evidence and the parties’ arguments on appeal, the court agrees with the district court that RBS failed to come forward with evidence showing its 75 alleged trade secrets met the independent economic value requirement. Relatedly, the district court did not abuse its discretion in excluding Shostack’s testimony on the matter of independent economic value because it would not have aided RBS in satisfying its burden of proof. For these reasons, Synopsys was entitled to summary judgment on the Virginia and federal misappropriation-of-trade-secrets claims.

Affirmed.

Synopsys Inc. v. Risk Based Security Inc., Case No. 22-1812, June 15, 2023. 4th Cir. (Agee), from EDVA at Richmond (Gibney). Andrew Evan Samuels for Appellant. Catherine Emily Stetson for Appellee. VLW 023-2-157. 31 pp.