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TYSON FOODS, INC. v. CONAGRA, INC., and ConAgra Poultry Co.
SUPREME COURT OF ARKANSAS
That same year, Tyson initiated trade-secret litigation against ConAgra in which it contended that ConAgra had "raided" Tyson and hired away four top management executives, including Purtle, and that those executives would inevitably divulge or had divulged trade secrets to ConAgra. Tyson's prayer for relief included an injunction against disclosure of Tyson's trade secrets and damages for misappropriation of the same. Allegations against Purtle were severed, because it was alleged that he had actually given trade secrets to ConAgra. The trial of the remaining three executives proceeded. The trial court in that trial found that certain pricing information and marketing strategies were trade secrets, and it enjoined the three former Tyson executives from revealing those trade secrets for a period of one year. This court reversed and held that the trial court erred in granting the injunction, because Tyson had made no efforts to restrain disclosure of information postemployment. . . .
[Legal History] - The case involving Purtle was tried in October 2000, and a jury was impaneled, though the matter was in chancery court. Evidence was presented on (1) whether the nutrient profile was a trade secret; (2) whether it was misappropriated; and (3) what damages may have resulted from a misappropriation. Following a trial on liability, the trial court found that the "nutrient profile" was a trade secret under Arkansas law and was misappropriated. The trial court so instructed the jury, and the matter of damages was submitted to a jury. The jury returned a verdict in favor of Tyson for trade secret misappropriation in the amount of $ 20,094,531. On October 26, 2000, the trial court entered a judgment in the amount of $ 20,094,531 against ConAgra. . . .
[Legal Analysis] - Postemployment confidentiality agreement. Turning to the merits, we first consider whether the trial court erred in concluding that . . . a postemployment confidentiality agreement be signed in all instances as an absolute prerequisite for trade-secret status and protection. We hold that the trial court did err in this regard. . . .In short, we did not specifically require in Cardinal Freight or in Tyson I that a postemployment confidentiality contract be entered into in all instances to identify trade secrets and to protect them. That was simply one measure to which we referred that could be taken by the company to assure trade-secret protection postemployment. . . .
Trade-Secret
Protection - Having concluded that a postemployment confidentiality
agreement is not an absolute requirement in all instances for trade-secret
protection, we now consider whether the trial court was right to rule in favor
of ConAgra on its motion for judgment notwithstanding the verdict, albeit for
the wrong reason. . . . In this regard, we examine what steps Tyson took
both during Purtle's employment and postemployment to identify the nutrient
profile as a trade secret and to protect it. Tyson urges that it did take pains
to protect its confidential information and points to its Corporate Code of
Conduct and Compliance Policy (Corporate Code) as evidence of that fact. .. . It
is clear . . . that Tyson did not necessarily equate confidential information
to a trade secret. More was required under our trade-secret statutes. (4) "Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (A) Derives independent 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. Ark. Code Ann. § 4-75-601(4) (Repl. 2001).
In addition to the statute, this court has endorsed a six-factor analysis in determining whether information qualifies as a trade secret: (1) the extent to which the information is known outside the business; (2) the extent to which the information is known by employees and others involved in the business; (3) the extent of measures taken by the company to guard the secrecy of the information; (4) the value of the information to the company and to its competitors; (5) the amount of effort or money expended by the appellee in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. . . .
As to the third factor, which is the extent of measures taken by the company to guard the secrecy of the information, this court held in Tyson I that "the failure of a business to protect against the disclosure of information it considers to be secret following employment is critical to our analysis and ultimate decision regarding whether the information is in fact a trade secret." Tyson I, 342 Ark. at 680, 30 S.W.3d at 731. Here, Tyson maintains that it took reasonable efforts to guard the secrecy of its nutrient profile. We disagree.
Tyson specifically argues that Purtle admitted that he considered the nutrient profile to be confidential and that he instructed others that it was. Further, Tyson claims that Purtle knew of his obligation to keep such information secret because of the Corporate Code. Tyson also asserts that the nutrient profile was an internal document and was not part of any third-party customer contract. Moreover, it contends that, according to Dr. Brister, only five people at Tyson retained a hard copy of the nutrient profile. ConAgra counters this by urging that while Purtle thought the nutrient profile was confidential, he testified that he never considered it to be a trade secret. ConAgra also points to Purtle's testimony that hundreds of Tyson managers in the field were given a hard copy of the nutrient profile, without an admonition of confidentiality, which undercuts any notion that the profile was a trade secret.
We turn then to an examination of the efforts taken by Tyson to keep the nutrient profile secret, both during Purtle's employment and after he left to join ConAgra. Certainly, covenants not-to-compete and confidentiality agreements would have been active efforts on the part of Tyson to protect proprietary information it considered to be a trade secret. . . .. However, those steps are not the only options available to a company. Melvin F. Jager, in his treatise, Trade Secrets Law, sets out other options, in addition to publishing corporate ethical principles, which would be acceptable measures for a company to institute to protect secret information. Those measures include detailed record-keeping procedures, physical security, confidentiality agreements, vendor and supplier confidentiality agreements, use of confidential stamps and legends, computer security measures like passwords, and the use of entrance and exit interviews. See 1 Melvin F. Jager, Trade Secrets Law § 5.05[2][c] (2001). . . .
No evidence exists to show that plaintiff took any affirmative measures to keep its [product] secret. No evidence was presented regarding internal or external physical security; that confidentiality agreements or understanding existed among those having access to plaintiff's [product]; that plaintiff's [product] contained confidentiality stamps or [was] kept under lock and key; or that employees received entrance and exit interviews imparting the importance of confidentiality. Consequently, we conclude that plaintiff failed to produce sufficient evidence to prove that under [the relevant section] of the [Trade Secrets] Act, its [product] was the subject of reasonable efforts designed to protect its secrecy. . . .
In sum, the efforts taken by Tyson to safeguard the information comes down to (1) the Corporate Code and Tyson's directive to its employees that the Code be read, and (2) the company's faith in the integrity of its employees. Yet, hundreds of Tyson managers were educated about the nutrient profile and there was no proof that Tyson took any steps to swear them to secrecy, or warn them of the confidential nature of the profile. Relying on an ethical guide like the Corporate Code, which fails to identify what is a trade secret or to mention the nutrient profile, is simply not enough for Tyson to invoke trade-secret protection.
We hold that the trial court clearly erred in finding that the nutrient profile was a Tyson trade secret and that the trial court was correct to reverse itself by granting the motion for judgment notwithstanding the verdict, albeit the court's reason for doing so was erroneous. Because we affirm the order granting the motion for judgment notwithstanding the verdict, ConAgra's cross-appeal on damages is moot. . .
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