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Arizona Supreme Court Holds That The Uniform Trade Secrets Act Only Preempts Claims for Misappropriation of Trade Secrets, Not Other Confidential Information

In Orca Communications Unlimited, LLC v. Noder (Ariz. Nov. 19, 2014), the Arizona Supreme Court ruled that Arizona’s version of the Uniform Trade Secrets Act (the “AUTSA”) “does not displace common-law claims based on alleged misappropriation of confidential information that is not a trade secret.”  Orca, a public relations firm, filed suit against Ann Noder, its former president, for unfair competition after Noder left Orca to start a rival company.  Orca alleged that Noder had learned confidential and trade secrets information about “Orca’s business model, operation procedures, techniques, and strengths and weaknesses,” and that Noder intended to “steal” and “exploit” that information and Orca’s customers for her company’s own competitive advantage.  The trial court dismissed Orca’s complaint at the pleadings stage, concluding that the AUTSA preempts Orca’s “common law tort claims arising from the alleged misuse of confidential information,” even if such information is “not asserted to rise to the level of a trade secret.”  The court of appeals reversed in part, holding that the AUTSA preemption exists only to the extent that the unfair competition claim is based on misappropriation of a trade secret. 

The Arizona Supreme Court considered the text of the 1990 AUTSA’s displacement provision, concluding that nothing in the language of the statute “suggests that the Legislature intended to displace any cause of action other than one for misappropriation of a trade secret.”  “If such broad displacement was intended, the legislature was required to express that intent clearly.”  The court assumed, but did not decide, that Arizona’s common law recognizes a claim for unfair competition.  Nor did it decide what aspects, if any, of the alleged confidential information in plaintiff’s unfair competition claim might fall within the AUTSA’s broad definition of a trade secret and therefore be displaced.  “That determination will not hinge on the claim’s label, but rather will depend on discovery and further litigation that has not yet occurred.

While the court acknowledged the split of authority among various states as to the preemptive effects of the Uniform Trade Secrets Act, it found that the “quest for uniformity is a fruitless endeavor and Arizona’s ruling one way or the other neither fosters nor hinders national uniformity.”  With its ruling, the Arizona Supreme Court joins courts in states such as Pennsylvania, Virginia and Wisconsin that have the narrowed the preemptive effects of the Uniform Trade Secrets Act.  Conversely, courts in other states including California, Indiana, Hawaii, New Hampshire, and Utah have held that Uniform Trade Secrets Act statutes should be read to broadly preempt all claims related to the misappropriation of information, regardless of whether the information falls within the definition of a trade secret.      

© 2022 Honigman Miller Schwartz and Cohn LLP National Law Review, Volume IV, Number 335
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William Berndt  Honigman Miller trade secrets false advertising trade secret law
Partner

 Mr. Berndt is a trial lawyer with substantial experience in state and federal courts across the country. He focuses his practice on trade secret and false advertising claims. He represents businesses and senior executives in disputes relating to noncompetition agreements, trademark and copyright, fraud, professional liability, internal investigations, and general business and commercial litigation. Mr. Berndt has first-chair experience in trials, arbitrations and other proceedings.

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David L. De Bruin appellate attorney patent litigation USPTO Honigman Chicago
Of Counsel

Mr. De Bruin is a seasoned first-chair trial and appellate attorney. He concentrates his practice on patent litigation and related proceedings before the United States Patent and Trademark Office. Mr. De Bruin successfully argues legal issues, as well as explain the most complex technology to judges and juries.

  • Tries patent cases in a variety of venues before judges and juries and has successfully argued numerous patent cases before the Federal Circuit Court of Appeals
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Marcus D. Fruchter lawyer Honigman Chicago office litigation specialist
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Mr. Fruchter defends or initiates litigation when it is inevitable and avoids lawsuits where possible. He provides zealous and creative representation that protects his clients’ legal rights and advances their strategic objectives. Mr. Fruchter litigates in state and federal courts across the country, and he has handled matters involving international and cross-border issues.

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Nicholas A. Gowen Honigman Chicago complex commercial litigation attorney t
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Mr. Gowen represents companies, individuals and law firms in disputes, including those involving intellectual property, trade secrets, unfair competition, employment matters and other business litigation matters. He approaches litigation with an eye toward results; understanding that advancing his clients’ litigation strategies should fit within their overall business interests.

  • Counsels businesses on ways to avoid litigation and resolve disputes using alternative measures
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312.701.9395
Steven A Weiss Litigation attorney Honigman Law firm Chicago ediscovery
Leader, Complex Commercial Litigation Practice Group

Mr. Weiss provides advice on a wide variety of business litigation for companies and business people. He is focused on resolving business disputes with particular experience handling intellectual property, breach of contract, trade secret, employment and covenant not to compete matters. Local and national companies and individuals retain Mr. Weiss to handle a full range of business disputes because they trust his judgment and litigation skills.

  • Provides cost-effective representation that achieves results - either through settlement...
312.701.9311
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