Thursday, February 22, 2007, 2/22/2007 05:50:00 PM

Federal Court in Massachusetts Dismisses Alleged Trade Secret Claim on "Continuous Use" Grounds

By Todd
Portfolioscope, Inc. is a developer of portfolio management and record keeping software. I-Flex Solutions Limited - headquartered in Mumbai, India - is one of its competitors. In a case pending in federal court in Massachusetts, Portfolioscope alleged that I-Flex stole and incorporated Portfolioscope's software into I-Flex's own software product and in doing so I-Flex, among other things, misappropriated Portfolioscope's trade secrets.

I-Flex filed a motion to dismiss the trade secrets claim, arguing that the so-called Portfolioscope trade secrets weren't even in use any more by Portfolioscope. Plaintiff argued in response, apparently, that "continuous use" or "current use" should not be a requirement for a trade secret misappropriation claim. Judge Tauro, correctly, disagreed.

The court noted that "Massachusetts law establishes that a trade secret must be in continuous use. Although plaintiff has adequately identified that the GPVS is a trade secret, it does not allege that this trade secret is in continuous use. Despite plaintiff's willingness to adduce new facts in its opposition, it noticeably fails to argue that the relevant trade secrets are still in use. Instead, plaintiff argues that such a requirement should not apply. In light of this failure in the pleadings, and because plaintiff has already had three opportunities to plead its claims, Count I is dismissed with prejudice."

Stale secrets and data sets that are no longer used to competitive advantage are not the stuff of misappropriation claims. Judge Tauro was correct, even reluctantly so, in recognizing this in the dismissal. The case can be cited as Portfolioscope, Inc. v. I-Flex Solutions Limited, --F.Supp.2d--, 2007 WL 460875 (February 12, 2007 D. Mass.).

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