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AMI 2602 Definition—Trade Secret

Arkansas Supreme Court Committee On Jury Instructions-Civil

Ark. Model Jury Instr., Civil AMI 2602
Arkansas Model Jury Instructions-Civil
November 2021 Update
Arkansas Supreme Court Committee On Jury Instructions-Civil
Chapter 26. Trade Secrets
AMI 2602 Definition—Trade Secret
When I use the words “trade secret” in these instructions, I mean information such as a [formula][or][pattern][or][compilation][or][program][or][device][or][method][or][technique][or][process] that meets the following three requirements:
(a) The information derive actual or potential independent economic value from not being generally known to other persons who could obtain economic value from its disclosure or use;
(b) The information was not readily ascertainable, through proper means by such persons; and
(c) The information was the subject of reasonable efforts to maintain its secrecy.
Use this instruction when the term “trade secret” is used in another instruction. Choose the bracketed words applicable to the facts of each particular case.
This instruction is based on Ark. Code Ann. § 4-75-601(4) (“Definitions: ‘Trade secret’”).
Several Arkansas cases have stated, in varying formulations, that the six factors set out in the Restatement of Torts § 757, cmt. b (1939), are also involved in the determination of whether the information at issue constitutes a trade secret. For the reasons explained below, the Committee based this instruction on the statutory definition rather than the Restatement factors or a combination of both. Those factors, which differ in some respects from the statutory definition in the Arkansas Trade Secrets Act (“ATSA”), are as follows:
(1) the extent to which the information is known outside of [the plaintiff's] business; (2) the extent to which it is known by employees and others involved in [the plaintiff's] business; (3) the extent of measures taken by [the plaintiff] to guard the secrecy of the information; (4) the value of the information to [the plaintiff] and to [the plaintiff's] competitors; (5) the amount of effort or money expended by [the plaintiff] in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.
The first post-ATSA Arkansas case to embrace the Restatement factors was Saforo & Assocs., Inc. v. Porocel Corp., 337 Ark. 553, 991 S.W.2d 117 (1999), which reviewed de novo under the “clear error” standard the chancery court's findings that defendant had misappropriated plaintiff's trade secrets. The court in Saforo, referring to “the six factors articulated in Vigoro Industries, Inc. v. Cleveland Chemical Co. of Arkansas, Inc., 866 F. Supp. 1150 (E.D. Ark. 1994), [aff'd in part and rev'd in part on other grounds, Vigoro Indus., Inc. v. Crisp, 82 F.3d 785 (8th Cir. 1996)],” stated that “[w]e hereby adopt the Vigoro factors as the controlling analysis for determining whether any particular information constitutes a trade secret.” 337 Ark. at 559, 991 S.W.2d at 120. The six factors applied in Saforo are actually from the Restatement, not Vigoro, which applied the statutory definition and not the Restatement factors. Several other cases followed Saforo in applying the six factors. Each opinion states the factors' role in different terms. Two cases, like Saforo, involved de novo review for “clear error” of chancery court findings: ConAgra, Inc. v. Tyson Foods, Inc., 342 Ark. 672, 678, 30 S.W.3d 725, 729 (2000) (“Bearing these standards [for review of chancery findings] firmly in mind, we turn then to the applicable criteria for determining whether company information qualifies as a trade secret. Our caselaw has endorsed these [six] factors as integral in making that determination”), citing Saforo, Vigoro, and Ark. Code Ann. § 4-75-601; Weigh Systems South, Inc. v. Mark's Scales & Equip., Inc., 347 Ark. 868, 874, 68 S.W.3d 299, 301 (Ark. 2002) (“We have identified several factors which we find material to our determination of whether information is a trade secret…. To determine whether [plaintiff] had trade secrets that [defendants] misappropriated, it is necessary to consider the six factors articulated in Saforo to [sic] the facts surrounding this case. ”). One case involved de novo review of the liability ruling in a “hybrid” case from chancery court, in which the trial court determined liability and the damages issue was submitted to a jury. Tyson Foods, Inc. v. ConAgra, Inc., 349 Ark. 469, 478–79, 79 S.W.3d 326, 331 (Ark. 2002) (“In addition to the statute, this court has endorsed a six-factor analysis in determining whether information qualifies as a trade secret.”). And one case, tried to a jury, involved appeal of denial of a motion for directed verdict. Wal-Mart Stores, Inc. v. The P.O. Market, Inc., 347 Ark. 651, 666–67, 66 S.W.3d 620, 630 (Ark. 2002) (“In addition to this [statutory] definition, the issue of whether information constitutes a trade secret under the ATSA is governed by six factors…. Information must meet both the ATSA definition and all of the six Saforo factors in order to qualify as a trade secret.”).
The Committee understands the foregoing cases to have “set forth six factors that reviewing courts must analyze, in addition to the definition contained within the statute, to determine if information is entitled to trade secret protection,” Southeast X-Ray, Inc. v. Spears, 929 F. Supp.2d 867, 874 (W.D. Ark. 2013) (emphasis added), rather than to have announced elements to be submitted to a jury. First, none of those cases addresses the question of jury instructions. Instead, all but one involve de novo appellate review of chancery court findings. And Wal-Mart Stores, Inc. v. The P.O. Market, Inc., the one case in which liability was decided by a jury, involved appellate review of the sufficiency of the evidence. Wal-mart challenged the jury instructions in that case, but the Arkansas Supreme Court, concluding that the case ought not to have been submitted to the jury, did not reach that issue. Vigoro, the Eastern District of Arkansas opinion cited in Saforo, set forth findings of fact and conclusions of law after a bench trial; but, as mentioned, that court applied the statutory definition of “trade secret” and not the Restatement factors. Second, a claim for misappropriation of a trade secret in Arkansas is now a statutory, not common law, cause of action. ATSA, based on a Uniform Act, expressly “displaces conflicting tort, restitutionary, and other law of this state pertaining to civil liability for misappropriation of a trade secret.” Ark. Code Ann. § 4-74-602(a); R.K. Enterprises, LL.C. v. Pro-Comp Mgt., Inc., 356 Ark. 565, 158 S.W.3d 685 (2004); Vigoro, supra. Third, other jurisdictions that have adopted the Uniform Trade Secrets Act are divided on the question whether to include the six Restatement factors in jury instructions for definition of a “trade secret.” Some states follow the approach described above: basing jury instructions on the Uniform Act definition, but also applying the six Restatement factors when courts determine the sufficiency of the plaintiff's evidence that the information is a protectable trade secret. E.g., Vernon's Okla. Forms 2d, Okla. Uniform Jury Instr.— Civil 29.2 (2014) (following statutory definition); MTG Guarnieri Mfg., Inc. v. Clouatre, 239 P.2d 202, 209-10 (Okla. Civ. App. 2010) (“The UTSA sets forth the definition of a trade secret in Oklahoma; in addition, the Oklahoma Supreme Court has adopted six factors from the Restatement of Torts, § 757, Comment b (1939), to help determine whether information is a trade secret.), citing Amoco Production Co. v. Lindley, 609 P.2d 733 (Okla. 1980) (a pre-Uniform Act case). Some states simply track the Uniform Act definition. E.g., 4 Minn. Prac., Jury Instr. Guides – Civil § 40.20 (2014); Ore. Uniform Civil Jury Instr. No. 51.02 (2014). Michigan included the six factors in its instructions for claims arising before Michigan adopted the Uniform Trade Secrets Act, but shifted to an Act-based definition for claims arising thereafter. Hon. William Murphy & John VandenHombergh, Mich. Non-Standard Jury Instr. Civil §§ 35.6 & 35.7 (2014). Some states follow the Uniform Act definition, but also include multi-factor elaborations of the terms “independent economic value” and “reasonable efforts to maintain secrecy.” 6A Wash. Prac., Wash. Pattern Jury Instr. Civ. 351.02, 351.05, 351.08 (2013); Jud'l Council of Calif. Civil Jury Instr. 4402, 4404, 4412 (2015). And some include the Restatement factors in the instructions as factors the jury “may consider” in determining whether the information is a trade secret. E.g., Iowa Civil Jury Instr. 3400.2 (2004); 1 Civil Ohio Jury Instr.537.11 (2015). The current Restatement has dropped the multi-factor approach, defining a ”trade secret” as “any information that can be used in the operation of a business or other enterprise and that is sufficiently valuable and secret to afford an actual or potential economic advantage over others.” Restatement (Third) of Unfair Competition § 39 (1995).
A customer list may constitute a trade secret where it meets the requisites of the Arkansas Trade Secrets Act, and it is immaterial whether the list is written or memorized. Allen v. Johar, 308 Ark. 45, 823 S.W.2d 824 (1992).
What constitutes a trade secret is a fact-intensive question. Bradshaw v. Alpha Packing, Inc., 2010 Ark. App. 659. Customer lists, pricing, on-going projects and profit information may all be trade secrets under the proper circumstances. Id. Evidence that an employee had relationships with some customers predating the employee's or customer's relationship with the employer may be a factor in deciding whether a customer list is a trade secret, but may not be dispositive. Id.
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