The Secret's Out: The Third Circuit Clarifies Pennsylvania Trade Secret Law in Advanced Fluid Systems, Inc. v. Huber

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2021]

THE SECRET’S OUT: THE THIRD CIRCUIT CLARIFIES

PENNSYLVANIA TRADE SECRET LAW IN

ADVANCED FLUID SYSTEMS, INC.

. HUBER

NTRODUCTION

The notion of protecting confidential information from theft is not

new.

The legal protection of this information as trade secrets dates as far

back as the Roman Empire.

However, modern trade secret law can be

traced back to the Industrial Revolution, when nineteenth-century factory

owners in England lobbied for increased protection of workplace secrets.

This trade secret protection was enforced by English courts at common

law, was spread to the United States, and was codified by state legislatures

into forms that remain in effect today.

Although Congress passed a fed-

eral trade secret statute as recently as 2016, trade secret law has historically

been considered a state issue.

In 2020, the United States Court of Appeals for the Third Circuit de-

cided a question of law relating to trade secret ownership in Advanced Fluid

Systems v. Huber.

In Huber, the Third Circuit declared that merely “lawful

possession” is necessary to bring suit, rather than fee simple ownership.

1. See, e.g., 1

ETER

S. M

ENELL

, M

ARK

A. L

EMLEY

& R

OBERT

P. M

ERGES

, I

NTEL-

LECTUAL

ROPERTY IN THE

ECHNOLOGICAL

: 2019

42 (2019) (detailing

history of protecting intellectual property since the Roman Empire era).

2. See id. (noting Romans created a cause of action for misappropriation of

trade secrets, although some scholars have cast doubt on the actual enforcement

of these laws).

3. See id. (explaining in preindustrial economies, “craftsmen passed along

their knowledge of the trade to their apprentice with the understanding that the

know-how would be kept secret during the apprenticeship period[,]” but with the

larger-scale factories created by the Industrial Revolution, trade secrets needed an

additional form of protection (citing Catherine L. Fisk, Working Knowledge: Trade

Secrets, Restrictive Covenants in Employment, and the Rise of Corporate Intellectual Property,

1800–1920, 52

ASTING

L.J.

441, 450–41 (2001))).

4. See id. at 42–43 (describing origins of modern trade secret law).

5. See Defend Trade Secrets Act of 2016, 18 U.S.C. § 1836 (West 2016); John

Cannan, A (Mostly) Legislative History of the Defend Trade Secrets Act of 2016, 109

IBR

. J

. 363, 364–65 (2017) (explaining the need for a federal remedy as trade

secret theft often occurred across state and national borders). As one commenta-

tor has observed, “[F]ederal civil court actions would give trade secret owners a

more efficient means to serve and prosecute those they saw as infringers, proceed-

ing through the federal court process instead of those of multiple states.” Id. (cit-

ing Protecting Trade Secrets: The Impact of Trade Secret Theft on American Competitiveness

and Potential Solutions to Remedy This Harm: Hearing Before the S. Comm. on the Judici-

ary, 114th Cong. (2015) (statement of Thomas R. Beall, Vice President & Chief

Intellectual Property Counsel, Corning Inc.).

6. 958 F.3d 168 (3d Cir. 2020). For further discussion of the Third Circuit’s

analysis of Huber, see infra notes 88–107 and accompanying text.

7. Huber, 958 F.3d at 179–80.

(813)

814 V

ILLANOVA

EVIEW

[Vol. 66: p. 813

This Casebrief discusses the Third Circuit’s ruling in Huber and explores

the fundamental difference between real property and intellectual prop-

erty implicit in the court’s opinion.

Part I of this Casebrief discusses the differences between real and in-

tellectual property, the origins of the Pennsylvania Trade Secrets Act, and

the ways courts have interpreted the trade secret ownership requirement.

Next, Part II provides background on the facts of Huber. Then, Part III

discusses the Third Circuit’s reasoning and holding in Huber. Following

this discussion, Part IV argues that the decision must be considered in

light of the fundamental differences between real property law and intel-

lectual property, with the decision finding further support when viewed

with the overarching goals of intellectual property and tort law in mind.

Finally, Part V predicts the impact that Huber will have on standing for

future trade secret cases in Pennsylvania.

I. B

ACKGROUND

This Part first provides background on the common law origins of

trade secret law and the fundamental differences between tangible and

intellectual property.

Then, once this foundation is established, this Part

examines modern trade secret statutes and case law regarding ownership

of such secrets.

A. Theoretical and Common Law Origins of Trade Secret Law

Generally, trade secrets “protect confidential commercially valuable

information against unauthorized use by third parties.”

Trade secret

protection derives value from the very thing its name suggests: secrecy.

In contrast with patent law, which requires disclosure of the invention in

exchange for a twenty-year period of exclusivity, trade secret protection

can last forever “as long as the information is kept confidential.”

This is

why many companies keep their valuable information, including the

“formula for Coca-Cola



, the recipe for Kentucky Fried Chicken



, and

the ‘secret sauce’ for McDonald’s



Big Mac



” as trade secrets.

But

8. For further discussion of the common law origins of trade secret law and its

differences from intellectual property law, see infra notes 10–43 and accompanying

text.

9. For further discussion of modern trade secret law statutes and case law, see

infra notes 44–63.

10. Chris Simboli, Intellectual Property Law Considerations for Business Lawyers, 61

APR

DVOC

38, 39 (2018) (defining trade secrets).

11. See DTM Rsch., L.L.C. v. AT&T Corp., 245 F.3d 327, 332 (4th Cir. 2001)

(“The ‘proprietary aspect’ of a trade secret flows, not from the knowledge itself,

but from its secrecy.”).

12. Simboli, supra note 10, at 38–39 (explaining there is “no legal mechanism

for the registration of a trade secret” because the secrets only retain their value by

being secret, and that any type of registration would defeat the purpose of a trade

secret).

13. Id.

2021] C

ASEBRIEF

815

choosing to protect information as a trade secret comes with some risk;

once the secret is out, the information is no longer protected.

The distinctions between real property and intellectual property im-

pact how trade secrets law should be interpreted.

The law of real prop-

erty, or tangible property, is “among the oldest institutions of human

civilization.”

Both the common law and criminal law have long pro-

tected private, real property from intrusion by others.

The philosophi-

cal bases for protecting tangible property are deeply-rooted in our

society.

Tangible property is physical matter; it can occupy only one

space at any given time.

Thus, possession of physical property must be

exclusive.

The central idea of real property lies in the ability of the

owner to exclude others from the use of it.

As opposed to real property, intellectual property is much less tangi-

ble.

Consequently, ideas do not have the same exclusive characteristics

14. See id.

15. For further discussion about how the differences between real property

and intellectual property apply to Huber, see infra notes 108–33 and accompanying

text.

16.

ENELL ET AL

, supra note 1, at 1 (explaining “[i]t is widely recognized

that people may own real property and tangible objects”).

17. See, e.g., Bell v. United States, 462 U.S. 356, 358–59 (1983) (noting the

evolution of laws protecting private property since the 13th century); Michael E.

Tigar, The Right of Property and the Law of Theft, 62

. L. R

. 1443, 1451–60

(1984) (describing the early common law origins of the law of theft in medieval

England).

18. See generally John Locke,

REATISES ON

OVERNMENT

(

3rd ed. 1698)

(justifying tangible property rights with a natural rights theory that focused on

applying labor to nature); John Rawls,

A T

HEORY OF

USTICE

(1971) (concluding

that “primary goods” and the “bases of self-respect” must be distributed to the

“maximal advantage of a representative member of the least advantaged social

class” based on principles that rational people behind a “veil of ignorance” would

apply); Margaret Jane Radin, Property and Personhood, 34

TAN

. L. R

957, 959

(1982) (framing property as objects that are “closely bound up with personhood

because they are part of the way we constitute ourselves as continuing personal

entities in the world”).

19.

ENELL ET AL

, supra note 1, at 2 (noting finite nature of tangible prop-

erty); see also John M. Kraft & Robert Hovden, Natural Rights, Scarcity & Intellectual

Property, 7

N.Y.U. J.L. & L

IBERTY

467, 475–78 (2013) (“In the physical world, every

object’s use has a beginning and an end, and in most cases, requires possession by

someone. This is the economic phenomenon known as scarcity.”).

20. See Irina D. Manta, Keeping IP Real, 57

OUS

. L. R

. 349, 354 (2019) (“Ex-

amples of rivalrous resources abound when it comes to land and chattels. Two or

more people cannot stand in the exact same spot at the same time. They cannot

write different things with the same pen simultaneously.”); see also

ENELL ET AL

supra note 1, at 2 (explaining the nature of exclusivity in tangible property as “if I

have it, you don’t”).

21. See

ENELL ET AL

, supra note 1, at 2 (“Settled ownership rights in land

and goods are thought to prevent both disputes over who can use the property for

what purpose, and the overuse of property that would result if everyone had com-

mon access to it.”).

22. See Mark A. Lemley, What’s Different About Intellectual Property?, 83

. L.

1097, 1099 (2005) [hereinafter Lemley, What’s Different?] (“I can use and im-

816 V

ILLANOVA

EVIEW

[Vol. 66: p. 813

that make up real property.

For example, if someone has a particular

idea and they tell someone else, one person will not be deprived of the

idea; rather, they both will possess it.

One of the key justifications for

intellectual property rights was to ensure creators had the right incentives

to engage in innovation.

If a creator knew that their invention or idea

can be stolen by others, why would they take the time and resources to

create in the first place?

Intellectual property law solves this problem by

allowing an inventor to exclude others from using their idea.

This eco-

nomic incentive helps promote the public welfare by encouraging the cre-

ation of new and useful ideas that can better society as a whole.

prove on an idea without having any sort of physical or legal control over it, and

my use of an idea does not deplete it or interfere with the ability of others to use

it.”); see also Kraft & Hovden, supra note 19, at 478 (“In the world of ideas and

knowledge, such scarcity is lacking.” (citing N. Stephan Kinsella,

GAINST

NTELLEC-

TUAL

ROPERTY

32 (2008))).

23. See Lemley, What’s Different?, supra note 22, at 1099 ( “[C]onsumption of

intellectual property is nonrivalrous, meaning that one of the benefits of physical

property rights—avoiding the tragedy of the commons—simply disappears.”);

Thomas B. Nachbar, The Comedy of the Market, 30

OLUM

. J.L. & A

RTS

453, 454

(2007) (“Intellectual works are similarly poorly adapted to excludability, since,

once intellectual works are publicly distributed, there is no tangible object whose

possession can readily prevent their uncontrolled sharing.”).

24. See

ENELL ET AL

, supra note 1, at 2 (“If I know a particular piece of

information, and I tell it to you, you have not deprived me of it.”); Nachbar, supra

note 23, at 454 (“If I hear a story, I can pass that story on to another without

diminishing my own understanding or enjoyment of the story.”).

25. See Yochai Benkler, Siren Songs and Amish Children: Autonomy, Information,

and Law, 76 N.Y.U.

L. R

23, 59 (2001) (“The Supreme Court has held consist-

ently and unanimously that American law explicitly treats intellectual property

rights in utilitarian terms, as limited monopolies granted to the extent necessary to

create incentives for production.” (first citing Campbell v. Acuff-Rose Music, 510

U.S. 569, 575 (1995); then citing Feist Publ’ns v. Rural Tel. Serv., 499 U.S. 340,

349–50 (1991); then citing Graham v. John Deere Co., 383 U.S. 1, 5–6 (1996)));

Mark A. Lemley, Property, Intellectual Property, and Free Riding, 83

. L. R

1031,

1031–32 (2005) (“Intellectual property protection in the United States has always

been about generating incentives to create.”).

26. See

ENELL ET AL

, supra note 1, at 19–20.

27. See id. at 19 (“Without such protection, others could copy or otherwise

imitate the intellectual work without incurring the costs and effort of creation,

thereby inhibiting the original creators from reaping a reasonable return on their

investment.”); Steve P. Calandrillo, An Economic Analysis of Intellectual Property Rights,

ORDHAM

NTELL

. P

ROP

. M

EDIA

& E

. L.J.

301, 310–11 (1998) (explaining that

because people are motivated by monetary rewards, Congress created intellectual

property laws to help spur creation).

28. See, e.g., Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 480 (1974) (not-

ing that the right to exclusion incentive offered by intellectual property law is de-

signed to foster innovation which will in turn “have a positive effect on society

through the introduction of new products and processes . . . .”); see also Jeanne C.

Fromer, A Psychology of Intellectual Property, 104

. U. L. R

. 1441, 1458 (2010)

(explaining that “utilitarianism is the prevailing approach to understanding intel-

lectual property in the United States because of the constitutional language ena-

bling Congress to enact copyright and patent laws in the first instance.” (footnote

omitted) (citing

U.S. C

ONST

art. I, § 8, cl. 8)).

2021] C

ASEBRIEF

817

While the basic trade-off for intellectual property law usually lies in

the disclosure of the innovation or idea in exchange for the right to ex-

clude others from using the idea, trade secret law is somewhat different.

A trade secret owner is rewarded not for disclosure, but rather the oppo-

site: for keeping information secret for what could be an unlimited dura-

tion.

Thus, trade secret law can be considered a form of “private

intellectual property law under which creators establish contractual limita-

tions or build legal ‘fences’ that afford protection from misappropria-

tion.”

While trade secret law found roots in common law property and

tort theories, trade secrets also exist to foster many of the same goals as

other forms of intellectual property, including the promotion of innova-

tion and “efficient disclosure of secrets.”

Trade secret law encourages

research and development in the areas that patent law does not reach and,

paradoxically, promotes broader dissemination of information.

Modern-day intellectual property law of patents and copyrights can be

traced back to England’s Statute of Monopolies in 1623 and Statute of

Anne in 1710.

Trade secret law originated much later.

The modern

29. See

ENELL ET AL

, supra note 1, at 36–37 (noting trade secret law differs

from other intellectual property doctrines by not being disclosure-based); Michael

Risch, Why Do We Have Trade Secrets?, 11

ARQ

. I

NTELL

. P

ROP

. L. R

1, 11 (2007)

(“Trade secrets differ from other forms of intellectual property in many ways.”).

30. See Risch, supra note 29, at 11 (noting that “the trade secret owner is re-

warded for keeping information that is neither new nor original away from the

public for an unlimited duration”).

31.

ENELL ET AL

, supra note 1, at 36 (explaining how trade secrets can still

be considered a type of intellectual property rights).

32. Id. at 44–46 (explaining the several justifications of trade secrets law);

Mark A. Lemley, The Surprising Virtues of Treating Trade Secrets as IP Rights, 61

TAN

L. R

311, 329–37 (2008) [hereinafter Lemley, Surprising Virtues] (explaining

how trade secrets promote an incentive to invent and efficiently disclose secrets).

The amount of innovation that trade secret law actually incentivizes has been dis-

puted by scholars. See Risch, supra note 29, at 26–27 (explaining that the incentive

to innovate is a “very minor justification of trade secret law” as companies would

still protect information by keeping it secret in absence of any trade secret law).

33. See Lemley, Surprising Virtues, supra note 32, at 332–37 (explaining how

trade secret law actually allows for greater disclosure of information as it serves as a

substitute for investments in physical secrecy that companies might otherwise

make and its existence as a legal right allows companies to share the secret infor-

mation with the knowledge that if the other party breaches, a legal remedy exists).

34. See Edward C. Walterscheid, Defining the Patent and Copyright Term: Term

Limits and the Intellectual Property Clause, 7

J. I

NTELL

. P

ROP

. L.

315, 324–36 (2000).

The Statute of Monopolies “gave the crown discretion to issue monopoly patents

for invention for any term of fourteen years or less.” Id. at 325. Likewise, the

Statute of Anne allowed for a copyright term of fourteen years and renewal term of

the same length if the author was still living at the end of the first term. See id. at

333–36.

35. Lemley, Surprising Virtues, supra note 32, at 315 (2008) (“While patent and

and trademark law had common law roots in various trade doctrines, trade secret

law in its modern form in Anglo-American jurisprudence is a common law creation

of the nineteenth century.”).

818 V

ILLANOVA

EVIEW

[Vol. 66: p. 813

version of trade secret law began as a common law concept in early nine-

teenth-century England during the rise of industrialization, as a response

to broadening demand for protection for workplace trade secrets that

were otherwise ineligible for patent protection.

In Vickery v. Welch,

Massachusetts court was the first to apply trade secret law in the United

States.

In Vickery, a chocolatier named Jonas Welch sold his business and

secret chocolate-making method to John Vickery.

But instead of keep-

ing the process secret, Welch told others how he made his chocolates.

Vickery, the new business owner, then sued Welch, claiming that Welch

breached their sales contract when he divulged the secret of the choco-

late-making process to others.

The court determined Welch had

wronged Vickery, the new business owner, and explained that public

knowledge of the chocolate-making secret method defeated the purpose

of the deal.

After the Vickery case, trade secret law continued to spread

under common law theories of property and tort law.

B. Modern State Statutes and Evolving Case Law Across the Country

As the common law doctrine of trade secrets continued to evolve,

many states developed their own understanding of trade secret law, caus-

ing complexity and a lack of uniformity.

To remedy this issue, the Uni-

form Law Commission published the Uniform Trade Secrets Act

(“UTSA”) in 1979, versions of which have since been enacted by forty-

eight states.

While states first started to adopt the UTSA in 1981, Penn-

36. See id. at 315–16;

ENELL ET AL

, supra note 1, at 42 (explaining the history

of trade secret law).

37. 36 Mass. (1 Pick.) 523 (1837).

38. See Lemley, Surprising Virtues, supra note 32, at 315.

39. Vickery, 36 Mass. (1 Pick.) at 525–27.

40. Id.

41. Id.

42. Id. at 526–27.

43. See, e.g., Peabody v. Norfolk, 98 Mass. 452, 460–61 (Mass. 1868) (holding

that the defendant breached his employment contract by disclosing a trade se-

cret); Stone v. Goss, 65 N.J. Eq. 756, 760–63 (N.J. 1903) (holding that an express

or implied contract can prevent a party from disclosing a former employer’s trade

secrets even after employment ended); Tabor v. Hoffman, 118 N.Y. 30, 37 (N.Y.

1889) (enjoining a competitor, who “surreptitiously copied” the plaintiff’s secret

patterns for a pump, from using the patterns because the trade secret was “the

property of the plaintiff, who owned not only the material substance, but also the

discovery which they embodied” even though the pump itself was publicly availa-

ble); see also D. Kirk Jamieson, Just Deserts: A Model to Harmonize Trade Secret Injunc-

tions, 72

. L. R

515, 522–25 (1993) (detailing the early history of United

States trade secret law and its evolution after Vickery).

44. See Patrick Ruelle, The Defend Trade Secrets Act: Why Interpreting the New Law

on Its Own Terms Promotes Uniformity, 21

ARQ

. I

NTELL

. P

ROP

. L. R

249 (2017)

(noting the confusion stemming from each state developing their own common

law trade secret doctrines).

45. See id.; see also Robert C. Denicola, The New Law of Ideas, 28

ARV

. J.L. &

ECH

195, 199 (2014) (noting that “[t]he drafters of the UTSA sought not only

2021] C

ASEBRIEF

819

sylvania continued to rely on common law until 2004, when it adopted the

UTSA.

Under the Pennsylvania Uniform Trade Secrets Act (“PUTSA”),

a trade secret is information that “(1) the owner has taken reasonable

means to keep secret; (2) derives independent economic value, actual or

potential, from being kept secret; (3) is not readily ascertainable by

proper means; and (4) others who cannot readily access it would obtain

economic value from its disclosure or use.”

The United States Court of Appeals for the Fourth Circuit considered

the ownership requirement of trade secrets when applying the Maryland

Uniform Trade Secrets Act in DTM Research, L.L.C. v. AT&T Corp.

DTM,

a company with expertise in analyzing large amounts of data, was in the

process of negotiating an employment contract with telecommunications

giant AT&T.

DTM claimed its data mining process was a trade secret

and had AT&T employees sign confidentiality agreements.

After DTM

demonstrated its process to AT&T, contract negotiations broke down and

the two companies failed to reach a deal.

Following the failed negotia-

tions, DTM claimed that AT&T took the trade secrets it learned during

DTM’s demonstration and incorporated them into AT&T’s own system.

AT&T argued that “well established principles of trade secrets law

oblige a plaintiff, as part of its prima facie case, to establish that it owns the

trade secret that is the subject of the dispute.”

The Fourth Circuit ex-

plained that, as opposed to real property, the idea of a “fee simple” inter-

est in a trade secret is not particularly relevant when considering the

definition of a trade secret under Maryland law.

The proprietary value

of a trade secret, the Fourth Circuit declared, arises “not from the knowl-

edge itself, but from its secrecy[,]” which can be destroyed once the se-

crecy is lost.

In turn, “one ‘owns’ a trade secret when one knows of it, as

uniformity, but also clarity and improvement through codification of what they

viewed as better-reasoned results”).

46. See Denicola, supra note 45, at 199 n.22 (explaining that Arkansas, Kansas,

Louisiana, and Minnesota were the first adopters of the UTSA in 1981); Kurt M.

Saunders, Can You Keep A (Trade) Secret?—the Pennsylvania Uniform Trade Secrets Act,

75 Pa. B.A. Q. 139, 139–40 (2004) (recognizing that Pennsylvania adopted the

UTSA in 2004).

47. Alois Valerian Gross, What Is “Trade Secret” so as to Render Actionable Under

State Law its Use or Disclosure by Former Employee, 59 A.L.R.4th 641, 644 (1987); see 12

Pa.C.S. §§ 5301–08.

48. 245 F.3d 327 (4th Cir. 2001).

49. Id. at 329.

50. Id. at 330.

51. Id.

52. Id.

53. Id. at 331 (citing Surgidev Corp. v. Eye Tech. Inc., 648 F. Supp. 661,

679–80 (D. Minn. 1986)).

54. Id. at 332 (internal quotation marks omitted) (noting the “inherent na-

ture of a trade secret limits the usefulness of an analogy to property in determining

the elements of a trade-secret misappropriation claim”).

55. Id.

820 V

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[Vol. 66: p. 813

long as it remains a secret.”

Therefore, the court reasoned that DTM

did not have to demonstrate “fee simple” ownership in the trade secret;

possession can suffice as long as the information still meets the require-

ments of a trade secret under Maryland law.

In Brigham Young University v. Pfizer, Inc.,

the United States District

Court for the District of Utah declined to follow the possession approach

as outlined by the Fourth Circuit.

The district court stated that “[t]here

is ample authority for the proposition that one must own a trade secret to

sue for its misappropriation[,]” and dismissed a trade secret misappropria-

tion action because the plaintiff was not the sole owner of the secret.

While the plaintiff cited DTM to support the proposition that ownership is

not required for a trade secret misappropriation suit, the Utah court de-

clined to follow this rule without acknowledging whether it considered the

Fourth Circuit’s interpretation in DTM correct.

In Huber, the Third Circuit faced an issue similar to the one the Utah

District Court faced in Pfizer.

Relying on the Fourth Circuit’s reasoning

in DTM, the Third Circuit held that fee simple ownership of a trade secret

is not necessary to bring suit under PUTSA; only “lawful possession” is

required.

This Casebrief discusses the Third Circuit’s ruling and ex-

plores the fundamental differences between real property and intellectual

property implicit in the court’s opinion.

II. F

ACTS AND

ROCEDURAL

ISTORY

Advanced Fluid Systems (“AFS”) manufactures hydraulic systems for

heavy machinery.

In September 2009, AFS contracted with the Virginia

Commonwealth Space Flight Authority (“Space Authority”) to build a hy-

draulic system for the NASA rocket launch facility on Wallops Island, Vir-

ginia.

Huber, a full-time sales engineer at AFS from November 2006 to

56. Id. (citing

. C

ODE

. A

., C

. L

II § 11-1201(c)) (“Thus, one who

possesses non-disclosed knowledge may demand remedies as provided by the Act

against those who ‘misappropriate’ the knowledge.”).

57. Id. at 332–33.

58. No. 2:06-CV-890 TS 2012 WL 1032769 (D. Utah Mar. 27, 2012).

59. Id. at 2 n.13 (holding that a plaintiff did not have a valid trade secret

misappropriation claim because he did not actually own the trade secret).

60. Id. at 2 (explaining an employee who developed the trade secrets while

working for Brigham Young University does not have standing to assert a trade

secret misappropriation claim).

61. Id. at 2 n.13 (“Without stating whether BYU’s interpretation of [DTM] is

correct, the Court notes that the decision is not binding, and, to the extent that

the case would mean that Simmons had a claim for trade secret misappropriation,

the Court will not follow it.”).

62. See Advanced Fluid Sys., Inc. v. Huber, 958 F.3d 168 (3d Cir. 2020).

63. Id. at 179–80. (showing the lower hurdle of “lawful possession,” rather

than fee simple ownership, is enough to file suit).

64. See Advanced Fluid Sys., Inc. v. Huber, 295 F. Supp. 3d 467, 470 (M.D. Pa.

2018).

65. Id. at 471.

2021] C

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821

October 2012, was intimately involved with the development of this hy-

draulic system.

During this time, AFS provided the Space Authority a

“comprehensive package of engineering drawings” related to the design

and installation of the hydraulic system.

According to the terms of their

agreement, anything AFS employees generated during the performance of

the contract were deemed the “exclusive property” of the Space Author-

ity.

And yet, every single drawing AFS provided to the Space Authority

was stamped with an AFS confidentiality stamp emphasizing the “propri-

ety” of the drawings belonged with AFS.

In September of 2012, Orbital Sciences Corporation (“Orbital”) ac-

quired control of the Space Authority’s launch system, which included the

hydraulic system designed and manufactured by AFS.

Meanwhile, while

he was still a full-time AFS employee, Huber began communicating with

Livingston, a competitor of AFS, about the hydraulic systems AFS was cre-

ating for the Space Authority, which was now known as Orbital.

After

claiming Orbital was unhappy with AFS, Huber began sending Livingston

“various confidential AFS internal documents and engineering

drawings.”

Then, when Orbital sought bids for two hydraulic system projects, Hu-

ber worked closely with both Livingston and AFS to ensure that “Living-

ston’s bid was more competitive” for the first project.

Once awarded the

project, Livingston’s team relied “extensively on confidential engineering

drawings that AFS had created and Huber stole” as they approached the

design process.

For the second project, a “cylinder upgrade,” while

again working closely with Livingston on the bid, Huber failed to divulge

66. Id. at 473 (noting Huber eventually became AFS’s “de facto project

manager”).

67. Id.

68. Advanced Fluid Sys., Inc. v. Huber, No. 1:13-CV-3087, 2017 WL 2445303,

at *2 (M.D. Pa. June 6, 2017)).

69. Huber, 295 F. Supp. 3d at 484. The confidentiality stamp read: “This draw-

ing discloses propriety and confidential data of Advanced Fluid Systems, Inc., and

may not be used disclosed or released, in whole or in part, for any purpose outside

the authorized recipient, without signed authorization, and must be returned

upon request.” Id.

70. Advanced Fluid Sys., Inc. v. Huber, 958 F.3d 168, 174 (3d Cir. 2020) (not-

ing “AFS did not execute a non-disclosure agreement with Orbital, but Orbital

maintained a practice of only disclosing AFS’s drawings on a need-to-know basis”).

71. Id.

72. Id. (“To communicate with Huber, the Livingston Parties created a com-

mercial Dropbox folder, installed a virtual private network on Huber’s AFS laptop,

and provided him with a Livingston email address.”).

73. Id. at 174–75 (noting while working with AFS, Huber “succeeded in inflat-

ing [AFS’s bid] by over $130,000 to ensure that Livingston’s bid was more

competitive”).

74. Id. at 175.

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EVIEW

[Vol. 66: p. 813

information about Orbital’s project objectives to AFS and encouraged AFS

to only bid on an option not preferred by Orbital.

Then, in October 2012, Huber resigned from AFS and formed his

own business entity, INSYSMA, to submit his own bid for the cylinder up-

grade project.

Before resigning from AFS, Huber “downloaded nearly

98 gigabytes of AFS’s proprietary files to an external hard drive, including

its engineering drawings, bills of materials, and other documents for the

hydraulic system . . . .”

Huber continued to share confidential AFS docu-

ments with Livingston, but in the end, Orbital awarded the cylinder up-

grade project bid to Huber’s own business, INSYSMA.

In December 2013, AFS sued Huber, INSYSMA, Livingston, and Orbi-

tal for misappropriation of trade secrets under PUTSA and brought fed-

eral claims under the Lanham Act and the Computer Fraud and Abuse

Act.

AFS and Orbital reached a settlement agreement and Orbital was

dismissed from the case.

The federal claims were either dismissed or

abandoned by AFS.

The district court declined to dismiss the trade se-

cret claims under Pennsylvania law.

On summary judgment, the district

court “concluded as a matter of law that the information at issue qualified

as trade secrets and that the Huber Parties were liable under the Trade

Secrets Act for misappropriating it.”

The court held a bench trial regarding the Livingston Parties.

the conclusion of the bench trial, the district court found that the Living-

ston Parties were liable for misappropriating AFS’s trade secrets.

De-

75. Id. (noting Huber provided Livingston with confidential AFS documents

for the cylinder upgrade project).

76. Id.

77. Id. (stating these documents pertained to all of AFS’s “pending and past

project files dating back to 1993”).

78. Id.

79. See Advanced Fluid Sys., Inc. v. Huber, No. 1:13-CV-3087, 2017 WL

2445303, at *7 (M.D. Pa. June 6, 2017). In addition to Huber, INSYSMA, Living-

ston, and Orbital, ASF named other defendants. Id. at *1. These additional de-

fendants included Livingston’s president, Clifton Vann, and Thomas Aufiero, a

former AFS employee who left to become a regional sales manager at Livingston in

2011. Id. at *2–3. AFS also brought claims of breach of fiduciary duty and aiding

and abetting breach of fiduciary duty. Id. at *7.

80. Huber, 958 F.3d 168, 175. AFS dismissed Orbital “in exchange for Orbital’s

agreement to grant AFS a subcontract for certain work on the hydraulic system.”

Id.

81. Id.

82. Id.

83. Id. at 176.

84. Id. During the trial, one of the Livingston Defendants’ lawyers, Philip Mo-

rin, informed the trial court that he was not admitted to practice before it. Id.

The trial court permitted Morin to continue his representation, but after the trial,

Morin failed to submit proposed findings of fact and conclusions of law by the

appropriate deadline. Id. This issue would be relevant for one of the defendants’

arguments on appeal. Id.

85. Id. Further, “[t]he Court awarded AFS compensatory damages from all

Appellants, based on lost profits, exemplary damages under the Act against Huber

2021] C

ASEBRIEF

823

fendants filed several post-trial motions, all of which were denied by the

trial court.

Each Defendant party then appealed.

III. N

ARRATIVE

NALYSIS

On appeal, the Third Circuit considered arguments regarding owner-

ship of trade secrets, the conduct of Defendants’ counsel at trial, and

other issues regarding damages.

Ultimately, the Third Circuit agreed

with the trial court’s reasoning and affirmed the judgment in its entirety.

The central issue on appeal was whether AFS could maintain a trade

secret claim under Pennsylvania law even though its contract with the

Space Authority expressly granted the Space Authority ownership over

AFS’s confidential information.

Defendants argued that: (1) AFS did

not own the trade secrets; (2) even if ownership is not a prerequisite for

standing, AFS lacked standing because it did not lawfully possess the trade

secrets; and (3) the information at issue could not be classified as trade

secrets because “inadequate measures were taken to ensure their contin-

ued secrecy.”

First, the Third Circuit rejected Defendants’ argument that AFS did

not own the trade secrets.

The court relied on the reasoning of DTM, a

Fourth Circuit decision, that dealt with a similar issue.

Following the

DTM court, the Third Circuit explained that while ownership of real prop-

erty is sufficient to maintain a trade secret misappropriation claim, it is not

necessary.

Such a requirement would impede upon the “substantial in-

terest that lawful possessors of the secrets have in the value of that se-

crecy,” and would not be consistent with statutory language that lacks such

alone for his trade secret theft, and punitive damages against Huber, Livingston,

and Vann, jointly and severally, stemming from Huber’s breach of fiduciary duty.”

Id.

86. Id. The post-trial motions argued:

(i) the Livingston Parties were entitled to a new trial because of the mis-

conduct and negligence of their insurer-retained counsel; (ii) the evi-

dence did not support a punitive damages award against the Livingston

Parties; (iii) the District Court incorrectly failed to reduce its compensa-

tory damages award by the amount of AFS’s settlement with Orbital; and

(iv) certain additional costs were improperly excluded from the District

Court’s lost-profits analysis.

Id.

87. Id.

88. Id.

89. Id. (affirming the Middle District of Pennsylvania’s decision).

90. Id. at 177 (noting the “predominant” issue on appeal).

91. Id.

92. Id. at 177–78.

93. Id. at 177. “After examining the text of the Act and surveying cases from

other jurisdictions that have adopted some version of the Uniform Trade Secrets

Act, the District Court explained why it is appropriate to follow the reasoning set

forth in DTM . . . .” Id. (citation omitted). For a detailed overview of the Fourth

Circuit’s reasoning in DTM, see supra notes 48–57 and accompanying text.

94. Id.

824 V

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EVIEW

[Vol. 66: p. 813

element.

The court noted that the Maryland Uniform Trade Secrets Act

is similar to the Pennsylvania version because both lack ownership require-

ments on their face.

Thus, ownership “is not the sole kind of interest

that is relevant and subject to protection.”

Second, the court rejected Defendants’ argument that AFS did not

lawfully possess the information it claims as trade secrets.

Here, Defend-

ants argued that the transfer of rights to the trade secrets included in the

contract prevented AFS from lawfully possessing them.

However, AFS

physically maintained possession of the drawings and trade secrets and was

required to use those secrets to meet its obligations under the contract.

100

Further, the record showed that the Space Authority, despite being the

“owner” of the trade secrets, neither complained about AFS’s use of the

information nor pushed back when AFS attached confidentiality notices to

the trade secret documents.

101

As the court noted, the owner of a trade

secret has the authority to give others lawful possession, which was the case

here as “possessory rights were given to AFS, even if a full ownership inter-

est was not.”

102

Thus, AFS lawfully possessed the trade secrets.

103

Lastly, Defendants asserted that the alleged trade secrets were not

protectable under the law and that there was a genuine dispute of material

fact as to the reasonableness of the measures AFS took to ensure se-

95. Id. (summarizing the DTM court’s reasoning). In DTM, the Fourth Cir-

cuit explained that “‘[t]he proprietary aspect of a trade secret flows, not from the

knowledge itself, but from its secrecy[,]’ because ‘[i]t is the secret aspect of the

knowledge that provides value to the person having the knowledge . . . . While the

information forming the basis of a trade secret can be transferred, as with personal

property, its continuing secrecy provides the value, and any general disclosure de-

stroys the value.’” Id. (alterations in original) (quoting DTM, 245 F.3d at 332).

96. Id. at 177–78 (explaining the similarities between the Maryland and Penn-

sylvania trade secret laws). The court further explained that “while DTM’s ratio-

nale rejects the notion that trade secrets are just like tangible property, it still rests

on the premise that trade secrets are a species of property, a view entirely consis-

tent with Pennsylvania’s common law prior to the enactment of its version of the

uniform act.” Id. at 178 (citing Heraeus Med. GmbH v. Esschem, Inc., 927 F.3d

727, 738 (3d Cir. 2019)).

97. Id. at 178 (rejecting Defendants’ argument).

98. See id. (finding the second contention “similarly unavailing”).

99. Id.

100. Id.

101. Id. at 179 (noting the actions of the Space Authority after the contract,

which show they recognized that AFS had lawful possession of the information).

102. Id. (concluding “[t]he course of conduct evident in the record shows

that AFS clearly had permission to hold and use the secrets”). The court further

noted that had the agreement between AFS and the Space Authority explicitly

contained a license for AFS’s benefit, “any dispute about lawful possession could

have been avoided.” Id. (citing Metso Minerals Indus. v. FLSmidth-Excel L.L.C.,

733 F. Supp. 2d 969, 971–72 & n.4 (E.D. Wis. 2010)).

103. See id. (“But Appellants cite no authority for the proposition that one

who retains and uses a trade secret owned by another for that owner’s benefit, with

that owner’s knowledge, and, at a minimum, with that owner’s implied consent,

does not lawfully possess that trade secret. We decline to adopt such a counter-

intuitive rule of law.” (footnote omitted)).

2021] C

ASEBRIEF

825

crecy.

104

Specifically, Defendants argued that because AFS provided the

information to the Space Authority, a public entity, without a formal non-

disclosure or confidentiality agreement, the trade secret status was lost.

105

However, the court explained that while the Space Authority never signed

a formal confidentiality agreement with AFS, it still acted as though it had

a duty to do so.

106

Thus, the court dismissed all of Defendants’ arguments

opposing AFS’s trade secret misappropriation claims.

107

IV. C

RITICAL

NALYSIS

This Part explores the fundamental differences between real property

and intellectual property addressed in Huber, a distinction that both the

Third and Fourth Circuits have recognized.

108

This Casebrief argues that

these fundamental differences help inform why the Third Circuit’s deci-

sion is justified in light of both tort and intellectual property law justifica-

tions of trade secrets.

109

As previously discussed, possession of tangible

property is necessarily exclusive, unlike ideas, which do not contain the

inherent danger of overuse or overdistribution.

110

Therefore, the tradi-

tional rationales for protecting tangible property are not always proper for

justifying intellectual property.

111

Because trade secrets consist of ideas, which do not have to be exclu-

sively in a single place at any given time, it follows that a per se exclusive

ownership requirement is not necessary because two separate entities,

such as AFS and the Space Authority, can simultaneously possess the same

104. Id.

105. Id. (explaining public entities are subject to a state’s open records law).

106. Id. at 180 (agreeing with the district court’s rationale that Space Author-

ity only disclosed AFS’s trade secrets to third parties when necessary and honored

AFS’s proprietary designation).

107. See id. (dismissing Defendants’ trade secret misappropriation argu-

ments). The Third Circuit also rejected Defendants’ remaining arguments. Id. at

181–88. First, the court rejected the argument that a new trial should be granted

because of the conduct of the Livingston Parties’ counsel. Id. at 180–83. Addition-

ally, the Third Circuit ruled that the district court did not err with regards to puni-

tive damages against Defendants Vann and Livingston. Id. at 183–84. Regarding

the final two issues, the Third Circuit considered whether the district court “failed

to set-off the value of AFS’s settlement with Orbital from the compensatory dam-

ages it awarded to AFS” and the lost profit damages calculation awarded to AFS.

Id. at 185–88. In both cases, the Third Circuit once again held the district court

did not err. Id.

108. See id. at 177–78; DTM Res., L.L.C. v. AT&T Corp., 245 F.3d 327, 332

(4th Cir. 2001) (“The conceptual difficulty arises from any assumption that knowl-

edge can be owned as property.”).

109. See infra notes 115–33 and accompanying text.

110. See supra notes 15–28 and accompanying text (describing the funda-

mental differences between tangible and intellectual property).

111. See id.; see also Shubha Ghosh, The Fable of the Commons: Exclusivity and the

Construction of Intellectual Property Markets, 40

U.C. D

AVIS

L. R

855, 857–58 (2007)

(explaining why the “tragedy of the commons” does not apply to intellectual prop-

erty law).

826 V

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EVIEW

[Vol. 66: p. 813

trade secret.

112

One company’s possession of the idea does not deprive

the other from such possession, unlike tangible property, which can only

exist in one place at any given time.

113

Thus, absent statutory language to

the contrary, which was not present in Huber, requiring fee simple owner-

ship of a trade secret would be inconsistent with the inherent nature of

possessing ideas.

114

The Third Circuit’s holding is supported whether trade secrets are

viewed from either tort or intellectual property justifications. While under

Pennsylvania common law, trade secret misappropriation was considered a

violation of a traditional property right, and this justification has very early

roots in trade secret jurisprudence, it is likely not appropriate here.

115

Because both the Space Authority and AFS could both possess the trade

secrets simultaneously, justifications relating to real property would likely

not be very persuasive in this instance as it is difficult to relate a non-

exclusive lawful possession element to tangible property.

116

Trade secret

law has also been justified under contract law theories, but that cannot

serve as a “stand alone explanation” because it can only deal with instances

where privity is present between the parties, which would not apply to AFS

and Livingston in Huber.

117

While contract and traditional property justifications may not be ap-

propriate to support the Third Circuit’s lawful possession requirement, it

likely finds support under tort ideals. Early common law tort justifications

for trade secret misappropriation included the need to enhance “commer-

112. See Kraft & Hovden, supra note 19, at 478–79 (explaining the non-exclu-

sive nature of ideas).

113. See Lemley, What’s Different?, supra note 22, at 1099 (“I can use and im-

prove on an idea without having any sort of physical or legal control over it, and

my use of an idea does not deplete it or interfere with the ability of others to use

it.”); Nachbar, supra note 23, at 453–55 (noting how ideas are not subject to the

same principles of rivalry as tangible property).

114. See Advanced Fluid Sys., Inc. v. Huber, 958 F.3d 168, 177–78 (3d Cir.

2020) (noting an absence of an ownership requirement in PUTSA).

115. See id. at 178 (recognizing that Pennsylvania has traditionally relied upon

a “real property” justification of trade secrets); Anaconda Co. v. Metric Tool & Die

Co., 485 F. Supp. 410, 425 (E.D. Pa. 1980) (citing Sims v. Mack Truck Corp., 488 F.

Supp. 592 (E.D. Pa. 1980) (noting Pennsylvania’s reliance on real property law

justifications for trade secrets); see also Tabor v. Hoffman, 118 N.Y. 30, 37 (1889)

(finding a trade secret misappropriation with a basis in real property law).

116. See supra notes 15–28 and accompanying text for a discussion about the

differences between real and intellectual property; see also DTM Rsch., L.L.C. v. AT

& T Corp., 245 F.3d 327, 332 (4th Cir. 2001) ([“T]he inherent nature of a trade

secret limits the usefulness of an analogy to property in determining the elements

of a trade-secret misappropriation claim.”).

117. See Lemley, Surprising Virtues, supra note 32, at 323 (noting the drawbacks

to classifying trade secrets solely as contractual rights); Alan J. Tracey, The Contract

in the Trade Secret Ballroom—A Forgotten Dance Partner?, 16

. I

NTELL

. P

ROP

. L.J.

47,

78 (2007) (explaining that a contract theory of damages requires privity, while

trade secret damages do not require such a relationship).

2021] C

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827

cial morality and good-faith dealings in business.”

118

The actions of Hu-

ber and the Livingston parties in this case could hardly be characterized as

commercially moral, good-faith business dealings.

119

Why then should

the Defendants be able to escape liability merely because AFS was a “lawful

possessor” and not a fee simple owner of the trade secrets?

120

If AFS and

the Space Authority could both possess the confidential information at the

same time while maintaining its secrecy, and AFS could otherwise prove all

trade secret misappropriation elements under PUTSA, then allowing AFS

to recover damages against the Defendants is very much in line with main-

taining commercial morality and good-faith dealing within the industry.

121

Intellectual property justifications also provide additional support for

the Huber decision. It has been argued that trade secrets provide an incen-

tive to innovate, similar to patent and copyright law, although the exact

amount of innovation trade secret law actually incentives has been dis-

puted.

122

Trade secret law also helps promote another central purpose of

intellectual property law: disclosure of information, which in turn can ben-

efit the public.

123

Patents very clearly attempt to achieve this goal by re-

quiring public disclosure of the invention in exchange for a twenty year

monopoly, after which time, the public is free to use and practice the

art.

124

While trade secret protection is conditioned on secrecy, it can actu-

118. See

1 M

ELVIN

F. J

AGER

, T

RADE

ECRETS

, § 1:3 (2021) (describing the

tort rationales of trade secret common law).

119. See supra notes 64–87 and accompanying text for further discussion

about Defendants’ actions.

120. See Huber, 958 F.3d 168, 178–79 (3d Cir. 2020) (holding that AFS had a

possessory interest in the trade secrets).

121. See id. (noting the dual possessory interests by both the Space Authority

and AFS); DTM, 245 F.3d at 332 (explaining that DTM, a possessor, not fee simple

owner, of the trade secrets could recover if it otherwise met all the requirements of

the trade secret misappropriation statute); see also

AGER

supra note 118, (empha-

sizing the importance of commercial morality and good-faith dealing in early trade

secret law).

122. See supra notes 25–28 and accompanying text for further discussion

about the incentive-based structure of intellectual property law; Compare Lemley,

Surprising Virtues, supra note 32, at 329–32 (arguing that trade secret law provides

an incentive to innovate) with Risch, supra note 29, at 26–27 (reasoning that the

incentive to innovate is a “very minor justification of trade secret law”).

123. See Vivian J. Fong, Are We Making Progress?: The Constitution As A Touch-

stone for Creating Consistent Patent Law and Policy, 11

U. P

. J. C

ONST

. L.

1163, 1166

(2009) (noting the importance of disclosure and dissemination of information as

objectives of intellectual property law); Lemley, Surprising Virtues, supra note 32, at

332–34 (arguing that trade secrets provide incentives to disclose).

124. See Matthew J. Conigliaro et. al., Foreseeability in Patent Law, 16

ERKELEY

ECH

. L.J.

1045, 1056 (2001) (“Patents thus inform the public of the precise nature

of the protected subject matter, placing that knowledge in the public domain, sub-

ject only to the limited intrusion of the patentee’s exclusivity right.”); Risch, supra

note 29, at 11 (explaining that patent and copyright laws “favor building on prior

work” (citing Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 150–51

(1989))).

828 V

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[Vol. 66: p. 813

ally encourage greater dissemination.

125

Trade secret law provides a way

for a company to license, disclose, and even commercialize its trade secrets

to others with the knowledge that the other cannot steal the idea without

compensating the trade secret holder.

126

In Huber, the assignment in ownership of the trade secrets was the

result of AFS contracting with a government entity, the Space Authority,

for work on NASA rockets.

127

If AFS were to be barred from recovering

against one who steals its trade secrets merely because it was no longer the

“official” owner due to the necessity of assigning the rights to the govern-

ment, this scenario would run in opposition to the central goals of trade

secret law. Companies need the incentive of trade secret legal protection

in order to better efficiently disseminate their ideas, without fear of having

their valuable information stolen without recourse.

128

If a fee simple ownership requirement prevented AFS from recover-

ing, why contract with the government ever again given the risk of trade

secret loss? Government entities and prime contractors often require as-

signment of IP rights and trade secrets, which is a requirement that is

likely not going to change.

129

Given the wide-spread practice of private

companies contracting with the government, fewer companies choosing to

share their valuable information with the government or prime contrac-

tors due to fear of trade secret loss would certainly lead to less public bene-

fit derived from government use of such information or technology.

130

Additionally, it is not as if AFS could have used a non-disclosure agree-

ment here to prevent the misappropriation of its secrets, as Livingston was

125. See Kewanee, 416 U.S. at 486–87 (citing Painton & Co. v. Bourns, Inc., 442

F.2d 216, 223 (2d Cir. 1971)) (explaining that if trade secret protection was abol-

ished, the result would be to hoard rather than disseminate knowledge”).

126. See id. (explaining that a trade secret holder would limit the utilization of

his invention, instead of licensing it, if no legal protections were in place); Lemley,

Surprising Virtues, supra note 32, at 336–38. While the parties could enter into a

contract limiting what could be done with the information, “[t]rade secret law

reaches beyond contract law by allowing courts to infer the existence of a confi-

dential relationship from circumstances in which transactions might be difficult or

impossible without that assumption.” Id.

127. See Advanced Fluid Sys., Inc. v. Huber, 958 F.3d 168, 174 (3d Cir. 2020).

128. See Kewanee, 416 U.S at 486–87; David W. Opderbeck, Social Network Anal-

ysis of Trade Secrets and Patents as Social Relations, 41 AIPLA Q.J. 355, 368 (2013)

(explaining that trade secrets can serve as a deterrent threat of liability, thus les-

sening transaction costs).

129. See Brandon H. Elledge & Terry L. Elling, When Possessing a Trade Secret is

Enough to Sue,

OLLAND

& K

NIGHT

’

ONT

. B

LOG

(May 6, 2020), https://

www.hklaw.com/en/insights/publications/2020/05/when-possessing-a-trade-se-

cret-is-enough-to-sue [https://perma.cc/JZ48-BWJL] (noting the traditional busi-

ness practice of assigning IP rights to government and prime contractors).

130. See e.g., David S. Levine, Secrecy and Unaccountability: Trade Secrets in Our

Public Infrastructure, 59

. L. R

135, 137 (2007) (noting that “[p]rivate busi-

nesses are increasingly displacing the government in providing and operating pub-

lic infrastructure,” and these businesses routinely use trade secrets).

2021] C

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829

a competitor; a party not in privity with AFS.

131

Thus, the lawful posses-

sion standard articulated by the Third Circuit helps encourage greater dis-

semination of valuable information because companies, such as AFS, will

be more likely to license or disclose their valuable technology to others

knowing that they do not lose their right to enforce such trade secret

rights.

132

This rationale is consistent with one of the central purposes of

intellectual property law: the incentive to disclose information.

133

V. I

MPACT

Huber may have a strong impact on the issue of standing for trade

secret lawsuits brought under Pennsylvania law. The more flexible “lawful

possession” standard is likely good news for many government or higher-

tier subcontracts.

134

Many high tier contractors, such as the Space Au-

thority in Huber, require that their subcontractors, such as AFS, “convey

ownership in intellectual property, including any trade secrets developed

under the subcontract[.]”

135

The Huber standard “opens the door for

such subcontractors and other non-owner or possessor-based trade secret

claims” to bring suit given that fee simple ownership is not required under

PUTSA.

136

However, each case will likely still be fact dependent on

whether reasonable safeguards were taken to protect the secret.

137

Fur-

ther, it remains to be seen whether other circuits will elect to follow the

Third Circuit in adopting the DTM court’s rule, or if they will require a

more traditional ownership element.

138

This case may also help to emphasize the importance of contract

drafting in these types of situations. As the Third Circuit noted, there

would not have been an issue over whether AFS was actually in lawful pos-

131. See Huber, 958 F.3d at 172 (recognizing that Livingston was a competitor

of AFS); see also Tracey, supra note 117, at 78 (noting that “only parties to a con-

tract may sue or be sued for breach of that contract”). While Huber was under

contract with AFS, trade secret misappropriation damages, as compared to con-

tractual damages, are much more “flexible and allow for the courts to formulate

the appropriate damages for the situation.” Id. at 76.

132. See Lemley, Surprising Virtues, supra note 32, at 336–38 (explaining how

trade secret law encourages dissemination of information); Opderbeck, supra note

128, at 368 (noting the deterrent effect of trade secret law).

133. See Fong, supra note 123, at 1166 (noting the importance of the disclo-

sure in intellectual property law); Deepa Varadarajan, The Trade Secret-Contract Inter-

face, 103

OWA

L. R

1543, 1550 (2018) (noting that the policy goals of patent and

formation disclosure, have also been applied to trade secret law).

134. See Elledge & Elling, supra note 129.

135. Id. Additionally, in such contracts, the “government customer. . . ordina-

rily obtains unlimited rights as a licensee in technical data that can comprise such

trade secrets.” Id.

136. Id.

137. See id. (noting the fact-dependent nature of trade secret claims).

138. For further discussion of the District of Utah declining to follow DTM,

see supra notes 58–61 and accompanying text.

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[Vol. 66: p. 813

session of the information had the contract expressly named AFS as a li-

censee.

139

Thus, in their contracts, companies should be clear in

outlining who has “lawful possession” of trade secrets, rather than leave it

up to the courts to decide. Additionally, Huber shows that if companies

want to be safe, they should ensure confidentiality agreements are signed

when dealing with trade secrets.

140

While the Third Circuit held the trade

secret protection was not lost due to a lack of confidentiality agreements

between AFS and the Space Authority, it likely would not have even been

an issue had confidentiality agreements been executed.

141

Overall, in Hu-

ber, the Third Circuit clarified Pennsylvania trade secret law and outlined

the possessory requirements of trade secrets, giving potential plaintiffs bet-

ter understanding of whether they have a valid claim in the future.

142

Joseph Yenerall

139. See Advanced Fluid Sys., Inc. v. Huber, 958 F.3d 168, 179 (3d Cir. 2020)

(explaining that had the contract “contained an explicit license for AFS’s benefit,

any dispute about lawful possession could have been avoided” (citing Metso Miner-

als Indus. v. FLSmidth-Excel L.L.C., 733 F. Supp 2d 969, 971–72 & n.4 (E.D. Wis.

2010))).

140. See id. at 179 (noting Defendants’ argument that reasonable measures

were not taken to ensure the secrecy of the information given that formal confi-

dentiality agreements were not signed).

141. See id. at 180 (“[E]ven if the Authority did not contractually bind itself to

do so, it nevertheless believed it had an obligation to preserve the confidentiality

of AFS’s designs, and at all relevant times it conducted itself in a manner consistent

with that belief.”).

142. See id. at 177–79 (analyzing the possessory requirements of trade secrets

under Pennsylvania law).