Diamond Power International, Inc. v. Davidson
540 F.Supp.2d 1322
In the United States District Court for the Northern District of Georgia
Civil Action 1:04-CV-0091-RWS CCH & 1:04-CV-1708-RWS-CCH
Before District Judge R.W. Story
Decided on October 01, 2007

Relevancy of the Case: Types of information covered under the scope of “trade secrets” as per the Georgia Trade Secrets Act of 1990

Statutes and Provisions Involved

• The Computer Fraud and Abuse Act, 18 U.S.C. § 1030
• The Georgia Trade Secrets Act of 1990, O.C.G.A. § 10-1-760

Relevant Facts of the Case

• The court heard two lawsuits filed by the same plaintiff, Diamond Power International, Inc. (DPI). Davidson is the defendant in the first case (1:04-CV-0091-RWS CCH), while Clyde Bergemann, Inc. is the defendant in the second case (1:04-CV-1708-RWS-CCH).
• DPI and Bergemann are both in the business of making and servicing mechanical equipment known as soot blowers. Soot blowers are used to clean large industrial and utility coal-fired boilers. These two companies are the industry’s two leading players and have been strong competitors since 1988. The former manufactures over 70% of industrial soot blowers, while the latter controls the remaining 30% market share.
• Each company offers rebuilding and repairing services and aftermarket parts for its own and competitor’s systems.
• DPI has claimed that Davidson began exploiting his access at DPI under the premise of retirement. However, he acted as Bergemann’s agent to gather critical accounting, financial, and product information for Bergemann’s benefit. As DPI’s former service operations manager, he stole various trade secrets for the benefit of DPI’s main competitor. Bergemann profited by altering its prices in response to the information it received from Davidson.

Prominent Arguments by the Counsels

• The plaintiff’s counsel submitted that Davidson, acting as an agent of Bergemann, misappropriated nine trade secrets from DPI. The counsel provided a list of reports and documents, along with designs of DPI’s key products. Further, he breached his contract with DPI by failing to return confidential information after his employment ended. He also could not report a conflict of interest when he took a job with Bergemann while continuing his work for DPI.
• The plaintiff’s counsel alleged misappropriation and conversion of property, tortious interference with business relations, unjust enrichment, and tortious interference with contract against Bergemann. As for Davidson, the counsel claimed a violation of fiduciary duty (duty of loyalty) and conversion against Davidson.
• The defendant’s counsel submitted that some of the information is not a trade secret. Moreover, Davidson has not misappropriated any of the above information. DPI has failed to provide adequate evidence that the defendants’ use of DPI’s information led to DPI suffering injury.

Opinion of the Bench

• GTSA does not safeguard information that has been publicly expressed, such as through the sale or disclosure to customers. Even if the information is labelled as confidential or private, the plaintiff’s inability to keep it secret disqualifies it from trade secret protection.
• Out of nine documents specified by the plaintiff, only five can be considered trade secrets. However, there was no violation of CFAA as Davidson had authorised access.
• DPI’s conversion, unjust enrichment, breach of fiduciary duty, and tortious interference claims are clearly based on a trade secret to the full extent. Thus, they are superseded by GTSA.

Final Decision

• The District Court ruled that the defendants misappropriated five documents, while Davidson also breached his contract with DPI. Further, the court partially denied the motion for summary judgment in both cases.