2007 Wis. L. Rev. 1271 (2008)

Michael Ahrens

Introduction

Corporations are like jugglers. In one hand they must establish a market for their product. In the other hand they have to train and retain a workforce capable of creating and developing the products necessary to maintain their place in that market. Floating between a market full of competitors and a corporation's employees are the valuable trade secrets that give a corporation its competitive edge. Misappropriation of trade secrets has been estimated to cost companies over $100 billion annually. [FN1] Thus, balancing the need to protect trade secrets in the face of a transient workforce with the desire to maintain a strong and competitive economy is of great importance.
In light of the economic importance of trade secrets, the Uniform Trade Secrets Act (UTSA) was drafted in the 1970s to eliminate state-by-state variation in judicial interpretations of the common-law principles related to the misappropriation of trade secrets. Trade-secret law primarily serves to fill gaps in federal intellectual-property law by permitting businesses to protect commercially valuable information that cannot be patented. In several ways, however, and in spite of the adoption of some form of the UTSA in the majority of states, this desired uniformity has not occurred.
One major point of contention among different jurisdictions is whether the UTSA preempts other civil remedies for the misappropriation of confidential information when that information does not meet the statutory definition of a trade secret. In Burbank Grease Services v. Sokolowski, the Wisconsin Supreme Court was asked to decide this question. The court held that the Wisconsin Uniform Trade Secrets Act (WUTSA) does not preempt common-law civil remedies for the misappropriation of confidential information when that information does not meet the statutory definition of a trade secret.
Burbank Grease Services (“Burbank”), a limited liability company, collected and processed fry grease, industrial grease, and trap grease from its customers. Burbank hired Larry Sokolowski in 1996 to serve as its director of operations. He was later promoted to territory procurement manager, and in this capacity he prepared spreadsheets and billings, oversaw sales people, and managed customer relations with industrial clients. As a territory procurement manager, Sokolowski used several pieces of confidential information, including: (1) a list of contact and client information for some of Burbank's grease-trap customers, (2) a spreadsheet detailing client information concerning Burbank's industrial customers, and (3) a spreadsheet of client information organized by collection routes. These confidential documents contained information such as the total gallons of grease collected from different clients and the pricing applied to each customer. Sokolowski knew how Burbank treated all of this material because he was given an employee handbook with the warning that customer lists, financial information, and marketing strategies were confidential.
In April of 2001, Sokolowski resigned from his position at Burbank and signed an employment agreement to serve as a sales and customer-service representative for United Liquid Waste Recycling, Incorporated (“United Liquid”). United Liquid provided waste and sludge hauling and recycling services to clients throughout Wisconsin. Sokolowski took Burbank's confidential information with him and entered it into United Liquid's computer system. When United Liquid and Sokolowski formed United Grease to collect fry, industrial, and trap grease, Sokolowski used the information he had taken from Burbank to solicit customers. The majority of customers United Grease was able to acquire were formerly customers of Burbank.
In 2003, Burbank filed suit against Sokolowski in Dane County Circuit Court. In its complaint, Burbank alleged that Sokolowski had misappropriated trade secrets in violation of the WUTSA, breached his duty of loyalty as Burbank's agent, and intentionally interfered with Burbank's business relationships. Burbank also alleged that United Liquid and United Grease had aided and abetted Sokolowski in these actions.
Burbank and Sokolowski both filed motions for summary judgment. The circuit-court judge granted Sokolowski's motion and dismissed the complaint. The court held the WUTSA preempted civil remedies for the misappropriation of confidential information even when the information did not meet the statutory definition of a trade secret. As the information taken by Sokolowski did not fall within the statutory definition, Burbank's information was not protected by the WUTSA. Finally, due to the preemptive power of the WUTSA, Burbank was also precluded from making any common-law tort claims based upon the misappropriation of confidential information.
The Wisconsin Court of Appeals affirmed this decision. In reaching this conclusion, the court examined how other jurisdictions had approached the issue of preemption. The majority of these decisions held that the UTSA preempted common-law claims for the unauthorized use of confidential information. The court explained that the rationale was to preserve a single tort action for misappropriation of statutorily defined trade secrets and to eliminate other causes of action for misappropriation of information that does not meet that standard. To hold otherwise, the court concluded, “would undermine the uniformity and clarity that motivated the creation and passage of the Uniform Act.”
Upon review, the Wisconsin Supreme Court reversed the lower courts. The majority held that civil remedies other than those provided by the WUTSA are available for the misappropriation of confidential information when that information does not rise to the statutorily defined level of a trade secret. It concluded that the circuit court erred when it dismissed Burbank's complaint because, in addition to its claims under the WUTSA, Burbank had also stated common-law claims.
In its analysis, the majority relied upon the plain language of the WUTSA. To the majority, the WUTSA was the exclusive remedy for misappropriated trade secrets. [FN39] However, the language of the statute permitted civil tort claims for the misuse of confidential information. To hold otherwise, the majority stated, would be to alter the words of an unambiguous statute created by the legislature.
The majority recognized that at the time of their decision forty-four other states had adopted some version of the UTSA. However, it concluded that while the interpretation of similar statutes could be helpful, such an examination was not necessary in this case. The court's interpretation affirmed the statute's plain meaning. The majority also noted that even if they were to use decisions from other jurisdictions as extrinsic sources for interpretation, Burbank could fit into a class of cases holding the UTSA does not abrogate similar common-law claims.
In contrast, the dissent reasoned that the language of the WUTSA directed courts to examine decisions in other jurisdictions to meet the UTSA's goal of uniformity. The dissent argued that the majority disregarded one of the fundamental purposes of the WUTSA: to create a uniform statutory remedy for the misappropriation of trade secrets. Other jurisdictions may not have an entirely uniform approach to interpreting UTSA preemption, but, according to the dissent, a lack of absolute uniformity could not condone a complete disregard for those analyses. The dissent applauded the court of appeals' attempt to undertake an in-depth analysis of decisions from other jurisdictions. They agreed with the lower court's holding that preemption of all common-law claims alleging the misappropriation of information, regardless of whether information met the statutory definition of a trade secret, was the more persuasive and prevailing rule supported by legal commentators and the majority of other UTSA jurisdictions.
This Note analyzes the impact of Burbank Grease Services upon both Wisconsin and the Uniform Trade Secrets Act. Part II outlines the general evolution of trade-secret law in the United States and Wisconsin. Part III analyzes the arguments made by the majority and dissent in Burbank Grease Services regarding preemption, including how other jurisdictions have approached the issue. It maintains that the dissenting opinion sets forth the more logical and practical interpretation of the WUTSA. Finally, this Note discusses the negative impact this case will have on the areas of trade-secret litigation and employee mobility. In light of these arguments, this Note debates the future of the WUTSA in its current form and the utility of creating a federal trade-secrets act. It concludes that the Wisconsin Supreme Court arrived at the wrong decision regarding preemption under the WUTSA and advocates a return to the approach described by the court of appeals and the majority of other jurisdictions.