Saturn Systems, Inc. v. Militare
252 P.3d 516
| Colo. Ct. App. | 2011Background
- Saturn is a debt-collection firm with a proprietary, password-protected client/debtor database; access is limited to clients via usernames and passwords and to sales agents on a need-to-know basis.
- Militare became Saturn’s independent contractor sales agent in Jan 2003 under an agreement that included confidentiality (clause 12) and a non-solicitation/nondisclosure provision (clause 12; later described).
- Saturn terminated Militare in Jan 2005; Militare then joined a direct competitor and solicited a Saturn client (Premier Members Federal Credit Union) in March 2005.
- Saturn hired an expert (Travis) who found Militare accessed multiple Saturn client accounts and debtor notes after termination, indicating improper access to confidential information.
- Saturn sued for misappropriation of trade secrets and breach of contract; the trial court entered judgment in Saturn’s favor, awarding damages, attorney fees, and costs, and the appellate court affirmed the trade secrets finding, breach finding, and fee awards.
- The appellate court affirmed and remanded with directions for further proceedings consistent with its opinion.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Saturn’s database constitutes a trade secret under UTSA. | Saturn contends the client/debtor data is confidential, protected, and valuable. | Militare argues the data lacks protectable secrecy or value. | Yes; the court upheld trade secret status based on confidentiality, access controls, and value. |
| Whether Militare misappropriated Saturn’s trade secrets. | Militare knew he accessed confidential data after termination and used improper means. | Militare contends no misuse or misappropriation occurred. | Yes; the court found misappropriation based on Militare’s post-termination access to password-protected information. |
| Whether the nonsolicitation clause is enforceable under Colorado law as a trade secret protection provision. | Nonsolicitation is a valid protection of Saturn’s trade secrets. | Clause is void as an improper restraint on trade. | Enforceable under the trade secrets exception to § 8-2-113(2)(b) given the clause’s tailoring to protect secrets. |
| Whether Saturn may recover damages for Travis’s investigation as actual contract damages. | Investigation costs were necessary to prove breach and were provable damages. | Costs for investigation are not recoverable without proof of direct link to breach. | Yes; the $525 paid to Travis was recoverable as actual damages. |
Key Cases Cited
- Network Telecommms., Inc. v. Boor-Crepeau, 790 P.2d 901 (Colo.App.1990) ( UTSA factors and secrecy measures)
- Colorado Univ. Gob? Supply Co. v. Stewart, 797 P.2d 1303 (Colo.App.1990) ( reasonableness of secrecy measures and scope)
- Gold Messenger, Inc. v. McGuay, 937 P.2d 907 (Colo.App.1997) ( noncompetition clause tailored to protect trade secrets is permissible)
- Mgmt. Recruiters of Boulder, Inc. v. Miller, 762 P.2d 763 (Colo.App.1988) ( two-prong test for trade-secret related noncompete enforceability)
- Sonoco Prods. Co. v. Johnson, 23 P.3d 1287 (Colo.App.2001) ( misappropriation includes improper disclosure or acquisition, need not prove use)
- Mergenthaler (Colorado Accounting Machines, Inc. v. Mergenthaler), 44 Colo.App. 155, 609 P.2d 1125 (Colo.App.1980) ( separate NDTC vs. trade-secret protection; narrow tailoring required)
- Ajay Sports, Inc. v. Casazza, 1 P.3d 267 (Colo.App.2000) ( undisclosed expert testimony deemed harmless if not prejudicial)
- Kussman v. City & County of Denver, 671 P.2d 1000 (Colo.App.1983) ( reliance on raw data and earlier disclosures can cure disclosure gaps)
- Todd v. Bear Valley Vill. Apartments, 980 P.2d 973 (Colo.1999) ( harmlessness standard for Rule 37(c) discovery violations)