Monday, February 20, 2006, 2/20/2006 08:18:00 AM

Second Circuit Grapples with North Carolina Trade Secrets Law

In Nexan Wires S.A. v. Sark USA, Inc., slip op. (2d Cir. Feb. 13, 2006), the Court of Appeals for the Second Circuit considered issues relating to a trial court's jury charge under North Carolina's trade secrets law.

The court first affirmed the trial court's instruction to the jury that under North Carolina law it had to find that some misconduct occurred in North Carolina in order to find a violation of the North Carolina Trade Secrets Act.

Next, and more importantly, the court dealt with the issue of the interplay of that statute's burden of proof – which shifts the burden to defendant once a prima facie case is established – and the instructions to the jury on misappropriation. Under N.C.G.S. § 66-151(1), prima facie proof of misappropriation can be established by the introduction of evidence that the defendant (1) knows of should have known of the trade secret and (2) has had a specific opportunity to acquire the trade secret for disclosure.

The court refused, however, to give an instruction requested by plaintiff that could, the court reasoned, have led to a finding of liability without a showing of actual misappropriation. The court instead held that burden-shifting principles should not be allowed to confuse a jury as to the plaintiff's ultimate burden of proof and gave an instruction which made it clear that the ultimate burden remained with plaintiff.

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