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BFV Perspectives, Noncompete & Trade Secrets, | Feb 17, 2014

When Is Pricing Information a Trade Secret?

The alleged misappropriation of pricing information is often the subject matter of trade secrets cases.  Sometimes pricing information is a protectable trade secret, and sometimes it is not.  T.V.D.B. Sarl v. KAPLA USA, LP, No. 4:12-cv-230, 2013 WL 6623186 (S.D. Ga. Dec. 16 2013), illustrates when pricing information can constitute a protectable trade secret. 

The plaintiffs in KAPLA USA are in the business of manufacturing unique wooden toy blocks.  The blocks are made of French wood that is processed, packaged and shipped from Morocco.  In 2005, one of the plaintiffs entered into an exclusive distributor relationship with the defendants.  The parties operated successfully from 2005 through 2008.  However, in September 2008, one of the corporate defendants placed two orders for blocks.  The invoices for these blocks, which totaled approximately $90,000, were never paid.  The corporate defendant which ordered the blocks then went out of business.  In October 2008, a company called CITIBLOCS was formed.  This company started selling blocks very similar to those that the defendants previously distributed for the plaintiffs. 

The plaintiffs filed suit against this new entity, the plaintiffs’ former distributor, and the former distributor’s principal.  The plaintiffs asserted a host of claims.  This blog entry focuses on the plaintiffs’ trade secrets claim. 

The plaintiffs argued that their suggested retail prices and their wholesale prices constituted trade secrets.  The defendants argued that this information is not a trade secret because it is of no value to the plaintiffs.  The defendants also argued that there were no steps taken to protect the secrecy of this information as the plaintiffs never requested a confidentiality agreement, never kept any records of dissemination, and waited years to pursue a lawsuit. 

The plaintiffs argued that the factory costs, i.e., the costs that the defendants would have paid to the factory for the plaintiffs’ goods, are a protectable trade secret.  Without explaining its conclusion, the district court noted that the testimony of a former member of CITIBLOCS (i.e., the new company that was formed after the plaintiffs’ invoices went unpaid), supported the plaintiffs’ contention.  The district court further found that the plaintiffs did not provide this pricing information to anybody except the defendants, who were their exclusive distributor.  The district court found that this fact evidenced efforts by the plaintiffs to maintain the secrecy of their pricing information.  Ruling on the defendants’ motion for summary judgment, the district court found that resolution of whether the pricing information constitutes a trade secret had to be decided by a jury. 

Pricing information is a category of information which clients often believe constitutes their trade secret, and clients are frequently concerned about the misappropriation and misuse of pricing information.  While at times pricing information can be a trade secret, at other times it may not be, particularly when the pricing information is publicly available or disseminated widely.  KAPLA USAsuggests that the existence of an exclusive distributor relationship may help support a claim that pricing information shared during the course of such a relationship constitutes a trade secret.

BFV Perspectives, Noncompete & Trade Secrets, | Feb 17, 2014
Neal F. Weinrich
Neal F. Weinrich

Neal Weinrich knows noncompetes and trade secrets inside and out. A shareholder at Berman Fink Van Horn, Neal counsels clients in all industries on matters involving restrictive covenants, trade secrets and other competition-related issues.