October 18, 2007

Trade Secrets and Commercial Real Estate

Real estate and business litigation are first cousins. This fact is illustrated by the recent Court of Appeal opinion in San Jose Construction v. S.B.C.C., Inc. -- an action by one commercial construction company against another for misappropriation of trade secrets.

Plaintiff's former employee, a project manager, took confidential documents with him to his new job with a competitor. The documents were a compilation of information about the "design build" of more than a dozen projects that plaintiff used to emerge as the successful bidder on the projects. Using the confidential information, the former project manager sought to have the developers shift to his new employer.

The case contains a helpful summary of the law of trade secrets and unfair competition in CA. As in many trade secret cases, the defendant tried to "slice and dice" the information by claiming each bit of information by itself was not confidential. The plaintiff argued that it was the compilation of information (much like a secret recipe) that made it a trade secret. The Court of Appeal agreed by holding that plaintiff raised a triable issue of fact in opposition to defendant's motion for summary adjudication.

Trade secret cases are not uncommon in the real estate industry. Over the years, I have litigated cases involving proprietary building techniques used for factory built housing, customer lists in the mortgage business, and processes for originating specialized loans for multi-family housing.

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