The Third Circuit recently affirmed a ruling out of the U.S. District Court for the Middle District of Pennsylvania, which held that a NASA subcontractor could sue for misappropriation of trade secrets under the Pennsylvania Uniform Trade Secrets Act (the UTSA), even though the subcontractor did not own the trade-secret information. The subcontractor, Advanced Fluid Systems, Inc. (AFS), had signed a contract granting exclusive ownership rights in the hydraulic systems it designed to the Virginia Commonwealth Space Flight Authority. But the Third Circuit held that AFS could nonetheless maintain a lawsuit when its former employee misappropriated the designs for the benefit of AFS competitors.
The court ruled that an individual need not “own” the trade secret in a traditional or “fee simple” sense to sue for misappropriation under the UTSA. Rather, “lawful possession” suffices—those who lawfully possess a trade secret are equally invested in its value, which derives from its secrecy. The court based its holding on an analysis of the UTSA’s plain language, which does not expressly require that only the “owner” of a trade secret can bring a claim. The court also relied on a 2001 Fourth Circuit case, which likewise held that ownership is not a prerequisite to a misappropriation claim under Maryland’s Uniform Trade Secrets Act.
Because nearly all states follow the UTSA, other courts may similarly allow certain non-owners of trade secrets to bring trade secret claims, although it remains to be seen just how far courts will let plaintiffs stray. The ruling is unlikely to affect federal Defend Trade Secrets Act claims, however, because the DTSA expressly allows an “owner” to bring a civil action.
The Third Circuit case is Advanced Fluid Systems, Inc. v. Huber, Nos. 19-1722 and 19-1752 (3d Cir. Apr. 30, 2020).