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BFV Perspectives, Noncompete & Trade Secrets, | Sep 16, 2013

Northern District of Georgia Finds Georgia Trade Secrets Act Claim Involving Licensed Computer Software Survives Motion to Dismiss

An opinion of Judge Carnes of the United States District Court for the Northern District Georgia identifies some of the issues involved with claims under the Georgia Trade Secrets Act based on licensed computer software.  AirWatch, LLC v. Mobile Iron, Inc., 2013 WL 4757491 (N.D. Ga. Sep. 4, 2013).

Plaintiff AirWatch, LLC (“AirWatch”) sells software that permits secure mobile electronic messaging.  Defendant Mobile Iron, Inc. (“Mobile Iron”) is a competitor.

AirWatch’s Complaint alleged that, in July of 2012, a Mobile Iron employee posed as a representative of a fictitious company called Havenswright and pretended to be a potential customer of AirWatch.  After setting up a fake email account, the employee emailed an AirWatch representative to request a free trial of AirWatch software.  AirWatch granted a thirty-day trial of its software subject to an End User License Agreement (“EULA”).  The EULA stated that the user would “not engage in competitive analysis” of the software.  The Mobile Iron employee, on behalf of Havenswright, accepted these terms and was allowed to view and use the AirWatch software.  During this trial period, the Mobile Iron employee contacted AirWatch repeatedly with questions about how its software worked.  He received detailed answers to many of these inquiries.

In one instance, the Mobile Iron employee mistakenly sent an email from his Mobile Iron address, rather than from the false Havenswright address.  AirWatch employees immediately noticed that he used a different email address and recognized Mobile Iron as one of its competitors.  After access was terminated and the companies were unable to resolve the matter, AirWatch brought an action in the Northern District of Georgia.  AirWatch asserted numerous claims against Mobile Iron, including a claim under the Georgia Trade Secrets Act (“GTSA”).  Mobile Iron moved to dismiss.

To state a claim under the GTSA, a plaintiff must allege the existence of a trade secret, which the GTSA defines as follows:

Information, without regard to form, including, but not limited to, technical or nontechnical data, a formula, a patter, a compilation, a program, a device,  method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers which is not commonly known by or available to the public and which information:

 (A)       Derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

 (B)       Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

 O.C.G.A. 10-1-761(4).

Mobile Iron argued that the software did not qualify for trade secret protection, pointing out that because AirWatch had freely allowed it access via a trial, the program was readily ascertainable through proper means and therefore was not a trade secret.  Mobile Iron also took the position that only the source code of the software could be truly protected and that AirWatch had not alleged misappropriation of the source code.  AirWatch, 2013 WL 4757491 at *3.

The Court noted that “there is support for defendant’s theory that source code may be a trade secret, whereas the appearance and functionality of the software program cannot.”  Id. at *4.  However, the court, accepting AirWatch’s allegations as true at the motion to dismiss stage, concluded that information regarding the software could be protected as a “program” under the statute and that functionality could be protected as a trade secret if AirWatch showed that it made efforts to preserve the secrecy of the program’s functionality.  Id.

As to this point, the Court held that the fact that AirWatch had sent the software to Mobile Iron and to other users for a limited free trial did not, per se, forfeit the program’s trade secret status.  Id.  The Court noted that everyone to whom AirWatch had given access to the program was an individual licensee under limited terms and subject to the EULA.  At the pleadings stage, the Court could not conclude that AirWatch’s efforts to protect its alleged trade secret information were not reasonable.

The Court therefore held that AirWatch stated a claim for misappropriation of trade secrets.  The Court also denied the remainder of Mobile Iron’s Motion to Dismiss, including ruling that AirWatch’s fraudulent misrepresentation claim was not superseded by its trade secrets claim and that AirWatch stated a claim for breach of the EULA.

BFV Perspectives, Noncompete & Trade Secrets, | Sep 16, 2013