Software-as-a-Service (“SaaS”) companies are generally acutely aware of the need to protect their intellectual properties (“IP”), like patents, copyrights, and trademarks, when preparing their service contracts.

SaaS companies must be just as acutely aware of protecting IP that is covered by trade secret law. A good example of the dangers is the recent lawsuit filed by SaaS company Replenium against Albertsons — a grocery store chain with more than 2,000 stores in 30 States. Replenium worked with Albertsons for three years, developing an online subscription purchasing platform that would allow Albertsons’ customers to have their frequently purchased items automatically repurchased at chosen intervals for delivery or pick-up. Replenium’s platform design is alleged to be unique in that its automation can be used for large “baskets” of goods — instead of small-batch replacements — and that it can be used with products having varying profiles such as fresh, frozen, needs refrigeration, must-be-kept-cool, etc.

Replenium alleges that, despite extensively negotiated non-disclosure and confidentiality agreements, Albertsons misappropriated its trade secrets, launched its own version of the Replenium platform, and then canceled its SaaS contract with Replenium. During the three years of development, Replenium shared various details of its platform structure and operation to ensure integration and compatibility with Albertsons’ systems. Replenium then filed a lawsuit in federal court alleging misappropriation of trade secrets, breach of contract, and other claims.

What is a Trade Secret?

Most States and the federal government have enacted statutes to protect trade secrets. The general definition of trade secrets involves four elements which are:

• Information, data, device, method, or anything similar
• That is secret, meaning that it is “not generally known”
• That the owner takes “reasonable efforts” to keep from becoming generally known and
• That provides “commercial value” from the fact that the information is secret

“Commercial value” is generally defined to mean that there is some “competitive advantage” gained from the fact that the information is secret.

Almost anything can be deemed a “trade secret,” including things as simple as customer or vendor lists, recipes, formulas, methods, plans, practices, etc. The federal Defend Trade Secrets Act explicitly lists technical information, programs, processes, and codes as items that can be protected as trade secrets.

“Misappropriation” is also broadly defined under U.S. trade secret laws. Misappropriation can mean an outright theft of secrets through something like espionage. But it can also mean unauthorized USE of trade secrets. This is the legal theory being used by Replenium. It willingly shared its trade secrets with Albertsons, but under non-disclosure and confidentiality agreements that required Albertsons to keep the data/information secret and to not use the secrets for their own purposes.

Some Lessons

SaaS companies must protect their trade secrets with the same intensity that they protect their other forms of IP. Even with high levels of protection, SaaS companies may STILL face misappropriation and/or IP infringement. When that happens, SaaS companies must be prepared to litigate. Replenium’s experience also suggests the need for some level of practical steps to prevent complete loss of relevant trade secrets. It may not be possible in a given circumstance, but it may be wise to entirely hold back key information, methods, devices, codes, etc. or hold such back until the very last possible moment.

Contact the SaaS Attorneys at Revision Legal

For more information, contact the experienced SaaS Lawyers at Revision Legal. You can contact us through the form on this page or call (855) 473-8474.