A Case Study in Trade Secrets – AvidAir v. Rolls-Royce

A Case Study in Trade Secrets – AvidAir v. Rolls-Royce

Reading case law isn’t just for attorneys.  If you are part of the aviation manufacture, repair or overhaul industry then the recent case AvidAir Helicopter Supply, Inc. v. Rolls-Royce Corporation (8th Cir. 2011) is a must read.  Decided December 13, 2011 by the United States Court of Appeals for the Eight Circuit, AvidAir v. Rolls-Royce provides an excellent summary of several important intellectual property concepts, including the rights to proprietary documents and trade secrets contained in most OEM overhaul manuals and technical bulletins – in this instance technical documents made available to Rolls-Royce Model 250 engine Authorized Maintenance Centers (AMCs).  The brief summary below focuses on one of the key legal concepts address by the court in the appeal.

 

Background:  In the underlying actions Rolls-Royce sought damages and injunctive relief for alleged trade secret violations by AvidAir related in large part to AvidAir’s use of certain AMC Overhaul Information Letters (or “Distributor Overhaul Information Letters or DOILs” as they are referred to in the case).  AvidAir sought a declaration that the DOILs were not protected by trade secret law.  For historical reasons AvidAir was able to acquire many early versions of certain DOIL’s but not the latest revisions necessary to stay up to date with the relevant FAA approved overhaul procedures.  In more recent years Rolls-Royce limited distribution of updated DOIL’s to AMCs and included a proprietary rights legend on most of its technical information.  AvidAir was not an AMC and argued that the modifications in the latest DOILs were substantially the same as earlier, publically available versions.  The district court ruled in favor of Rolls-Royce, finding that most but not all of the information at issue was a protected trade secret.  Subsequently, a jury awarded Rolls-Royce $350,000 and ordered AvidAir to return the protected documents.  It is in part from this result that AvidAir filed the appeal which is the subject of the December 2011 ruling.

Do the technical documents constitute a trade secret?  

Under the Uniform Trade Secret Act, a trade secret is: “information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) 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 (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.”

Regarding the first part of the test, the court found that the DOILs were compilations – compilations of both publically available information and new proprietary information.  Compilations of this type can be valuable so long as the combination affords a competitive advantage.  AvidAir argued that the DOILs cannot provide independent economic value because there is only a trivial amount of information that is not readily available in the older versions of the documents.  They argued that no new engineering advances were present in the newer revisions.  The court found that the existence of a trade secret is determined by the value of the secret not the merit of the technical improvements.  “The value of the Rolls-Royce documents is apparent when a shop is required to certify the return to service for an overhauled engine.”

Regarding the second part of the test, while Rolls-Royce’s efforts to maintain secrecy must be reasonable they need not be overly extravagant or absolute.  “It was undisputed that all the technical documents in question were labeled with proprietary rights legends.  Though AvidAir claims the documents were ‘freely available’, in the industry, it failed to present any evidence that Rolls-Royce actually distributed them to a party not bound by confidentiality agreements.”

In the final analysis the court of appeals affirmed the judgments of the district court in favor of Rolls-Royce.  Please feel free to contact me by email if you would like a copy of the decision.  It is well worth reading in its entirety.

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