Intellectual Property Law

Not Every Great Idea Is a Trade Secret

By Lee.Gesmer

You have a brainstorm: there is a market for dumpster rentals, and what better place to make the rentals than The Home Depot? You go to Home Depot and have it sign a non-disclosure agreement before you disclose this idea to it. You disclose the dumpster idea to Home Depot executives, but after much discussion and a great deal of back and forth over several years with many Home Depot employees, Home Depot turns you down. The next thing you know, Home Depot is renting dumpsters, using a business model not too different from the one you proposed.

You cry foul. You sue Home Depot in Massachusetts state court for misappropriation of trade secrets. Home Depot removes the case to Massachusetts federal district court where it grinds through a couple of years of discovery. During that process you claim that the damages you’ve suffered are between $19 and $60 million.

Home Depot files a motion for summary judgment. U.S. District Court Judge Douglas Woodlock grants summary judgment. Judge Woodlock observes that the idea of renting dumpsters through Home Depot is not a trade secret.

(1) the idea of Home Depot renting and (2) the idea of renting dumpsters [was not a trade secret] . . . anyone even vaguely familiar with the home improvement industry could have put these two concepts together easily based upon information in the public domain.

Essentially, the court relied on the hoary Massachusetts trade secret doctrine which state that a confidentiality agreement cannot make secret that which is not secret. Case dismissed.

Here is a link to the decision.

By the way, most large companies will not sign an NDA in advance of receiving business ideas for this very reason - if they reject the idea and adopt it later, they are vulnerable to suit. They then have to show that either the idea is not a “secret” (as Home Depot did here) or that it was already under consideration somewhere within their company prior to disclosure. Most companies conclude that rather than take that risk, it’s better to just refuse to sign NDAs. Without the NDA, this case would never have been filed or, it would have been dismissed much earlier. Home Depot learned that lesson the hard way.

Full post as published by Mass Law Blog on March 07, 2009 (boomark / email).