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Protecting Trade Secrets Requires Confidentiality

Posted by James Juo | Jul 21, 2023 | 0 Comments

An element of misappropriation of trade secrets is the acquisition of the trade secret as the result of a confidential relationship or through improper means.

The Sixth Circuit recently addressed how a plaintiff “failed to address the confidential relationship component” of its trade secret claim. Novus Group, LLC v. Prudential Financial, Inc., No. 22-3736, — F.4th — (6th Cir. July 17, 2023).

Here, two financial advisors came up with a financial product seemingly unique to the annuities market: the Transitions Beneficiary Income Rider which would guarantee that, following a life insurance policyholder's death, an insurance company would pay death-benefit proceeds to beneficiaries throughout their lifetimes.

The two founded Novus Group to launch the product, and they turned to Genesis, a financial product development company, to make sure that the Rider was feasible. And it relied on Annexus, another financial product developer, to spearhead the eventual pitch to Novus's target customer, Nationwide.

These arrangements were governed by two contracts: (1) an agreement between Novus and Annexus, and (2) an agreement among Novus, Annexus, and Genesis. Both agreements contained a confidentiality provision.

With respect to the pitch to Nationwide, however, Nationwide refused to sign a nondisclosure agreement (“NDA”), with Novus. And Novus apparently was cautioned not to disclose any confidential information about the Rider to Nationwide.

After the pitch, Nationwide chose not to pursue the concept.

Sometime later, a supervisor at Nationwide joined Nationwide's competitor, Prudential. Thereafter, Prudential launched Legacy Protection Plus, a death-benefit rider that Novus thought was similar to its Rider.

The Trade Secret Lawsuit

Novus sued Prudential for misappropriation of trade secrets under Ohio's Uniform Trade Secrets Act.

Novus had argued there was “a web of agreements” that included another agreement with Nationwide (but not Novus). Specifically, before Novus even existed, Genesis and Annexus had created a joint organization named AnnGen. As part of that arrangement, AnnGen and Nationwide executed their own confidentiality agreement covering talks about a possible relationship between the two parties.

The story [by plaintiff is] that because Annexus and Genesis had confidentiality agreements with Novus, and because AnnGen, an entity formed by Annexus and Genesis together, had a confidentiality agreement with Nationwide, [then Nationwide and its employees] had a confidential relationship with Novus. . . .

Novus's story, however, found no purchase with the Sixth Circuit. Novus was not a party, or a third-party beneficiary, to the agreement between Nationwide and AnnGen. And Nationwide was not a party to Novus's later confidentiality agreements with Annexus and Genesis.

Simply put, the agreements Novus points to show that Novus knew how to create a confidential relationship, yet did not form one with Nationwide which, remember, had at one point explicitly declined to do so. See, e.g., Fail-Safe, LLC v. A.O. Smith Corp., 674 F.3d 889, 894 (7th Cir. 2012); R & R Plastics, Inc. v. F.E. Myers Co., 637 N.E.2d 332, 341 (Ohio Ct. App. 1993).

The Sixth Circuit also rejected the plaintiff's belated attempts to recasts its misappropriation theory to also include the notion that Prudential acquired the confidential information through “improper means.”

The attorneys at Thomas P. Howard, LLC litigate trade secret cases nationwide including in Colorado.

About the Author

James Juo

James Juo is an experienced intellectual property attorney. He has successfully litigated various intellectual property disputes involving patents, trademarks, copyrights, and trade secrets. He also has counseled clients on the scope and validity of patent and trademark rights.


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