BFV Perspectives, Noncompete & Trade Secrets, | Feb 04, 2014

The Northern District Considers the Reach of the Georgia Trade Secrets Act Preemption Clause in RMS Titanic Case – Rules that Fraud Claim Will Go On

The Plaintiffs in RMS Titanic, Inc. v. Exhibitions, Inc., No. 1:13-CV-0625-WSD, 2013 WL 5675523 (N.D. Ga. Oct. 17, 2013), are involved in staging a “museum quality” exhibition of the Titanic.  According to the Plaintiffs, they worked to create a “‘chronological journey’ from the building of the ship to its ruin” by, among other things, presenting authentic artifacts, extensively re-creating rooms aboard the ship, and providing visitors with a “passenger ticket” with the name and personal information of one of the actual Titanic passengers.  Id. at *1.  The exhibition is presented at multiple venues throughout the world, and the design of the exhibition is substantially the same in every venue in which it is presented.  Id. at *2.

The Defendants in this case represented a promoter in Singapore and negotiated an agreement to present Plaintiffs’ Titanic exhibit in Singapore. Id.  During those negotiations, Defendants requested that Plaintiffs provide them with confidential and proprietary information relating to the design and layout of the exhibition.  Id. Plaintiffs first refused to provide such information, but Defendants stated that the information was necessary to stage the exhibition and assured Plaintiffs that it would only be used for that purpose.  Id. Thus, Plaintiffs agreed to provide the information so long as the relevant agreement included certain provisions designed to protect the proprietary information.  Id.  Relying on these provisions and Defendants’ verbal assurances that the information would only be used to stage the exhibition, Plaintiffs provided Defendants the requested information, which included design plans for unique works, CAD files, drawings, video footage, historical research, and electronic storage devices.  Id.

While Plaintiffs’ exhibition was open in Singapore, Defendants contracted with another promoter in China to present Defendants’ own Titanic exhibit (allegedly using the information that Plaintiffs had provided to Defendants). Id.  A comparison of the two exhibits showed that they were substantially similar.  Id.  But that was just the tip of the iceberg.  Soon, Defendants also began promoting their own Titanic exhibit throughout the United States and in other countries, at conferences and industry shows, and they entered into an agreement with National Geographic.  Id. at *3.

Plaintiffs claim that they spent years and millions of dollars to design the exhibit, re-create the various rooms, perform the necessary related research, draft narratives, and so on.  Id.  Defendants, on the other hand, were able to design and build the entire exhibit in only a few months.  Id.  Plaintiffs allege that this is because Defendants misappropriated Plaintiffs’ proprietary information.  Id. 

After Plaintiffs’ written demands went unanswered, Plaintiffs filed suit alleging conversion, breach of contract, unjust enrichment, fraud and fraudulent inducement, trade dress infringement under the Lanham Act, misappropriation of trade secrets, and to pierce the corporate veil.  Id. In response, Defendants filed a motion to dismiss on several grounds, including that the Georgia Trade Secrets Act (the “GTSA”) preempted Plaintiffs’ unjust enrichment and fraud claims.  Id.

In considering the preemption issue, the Northern District first reasoned, “The GTSA ‘supersede[s] conflicting tort, restitutionary, and other laws of this state providing civil remedies for misappropriation of a trade secret.’ The GTSA does not supersede ‘[o]ther civil remedies that are not based upon misappropriation of a trade secret.’” Id. at *12.  The Court further stated that claims that are superseded by the GTSA can be superseded even when “some of the misappropriated information qualifie[s] as a trade secret and some d[oes] not.”  Id.  Because Plaintiffs had alleged a claim under the GTSA with respect to their intangible property, their claims for conversion and unjust enrichment based on that same intangible property were superseded by the GTSA and were thus sunk.  Id. 

With respect to the fraud claim, however, the Court explained that Defendants had not presented sound authority that the fraud claims were superseded by the GTSA.  The Court, citing a Seventh Circuit decision, further explained that, because a claim for fraud “involves willful misrepresentation or deception,” such a claim may be viable “even if the allegedly-misappropriated information was a trade secret or a public record.”  Id.  Accordingly, the Court denied Defendants’ motion to dismiss the claims sounding in fraud.   Id. 

Thus, RMS Titanic indicates that courts may be reluctant to consider fraud relating to misappropriation of information as a conflicting tort claim that warrants dismissal under the GTSA’s preemption clause. 

BFV Perspectives, Noncompete & Trade Secrets, | Feb 04, 2014