Aspen Technology, Inc. v M3 Technology, Inc

Summarized by:

  • Court: Intellectual Property Archives
  • Area(s) of Law: Trade Secrets, Misappropriation of Trade Secrets
  • Date Filed: 05-29-2014
  • Case #: 12–20388, 13–20268
  • Judge(s)/Court Below: United States Court of Appeals, Fifth Circuit
  • LexisNexis Citation:
  • Westlaw Citation:
  • Full Text Opinion

To satisfy the element of "use" of a trade secret, actual use may be inferred when a former employee quickly develops software for a competing company; the code does not have to be found in the competing software, as it can still be used as a roadmap for development.

Opinion (Per Curiam): Aspen and M3 both compete in developing software for chemical and petrochemical companies. Aspen filed suit against M3 after M3 hired several former Aspen employees. At trial, the jury inter alia that M3 misappropriated trade secrets. On appeal, the Court held that causes of action for trade-secret misappropriation and copyright infringement have a three-year limitations period. Several equitable tolling doctrines may defer the accrual of a claim; the discovery rule and the doctrine of fraudulent concealment both apply to misappropriation and infringement claims. “Trade-secret misappropriation in Texas requires (1) the existence of a trade secret, (2) improper acquisition of that secret, and (3) use of the trade secret without authorization.” Furthermore, the Court reaffirmed a liberal construction of the term “use” which states that “any exploitation of the trade secret that is likely to result in injury to the trade secret owner or enrichment to the defendant is a ‘use.’” Reviewing the evidence in the record, the Court held that when a defendant's product is quickly developed by someone who had recently resigned from the plaintiff-company, actual trade secret use may be inferred. Additionally, the Court held that even if Aspen’s code never actually appeared in any Aspen product, M3 still could have used the older version of Aspen's code to avoid making mistakes or as a baseline for developing its software. Either would constitute “use” of a trademark. At trial, Aspen had submitted evidence in support of this theory. In calculating damages for misappropriating Aspen’s code, the Court held that even a few lines could be integral in the development of competing products, warranting a damage model built around the misappropriation of a fraction of software code. The District Court's rulings in regards to the trade secret claims were AFFIRMED.

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