The application of the restatement of torts in cases governed by the Missouri Uniform Trade Secrets Act

McPherson D. Moore
McPherson D. Moore is a shareholder of the law firm Sandberg Phoenix & von Gontard P.C. practicing intellectual property law. He was the principal drafter of MUTSA and was chair and co-chair of The Missouri Bar Patent, Trademark and Copyright Committee during the three-year period that MUTSA was proposed for enactment. During that period, he testified and presented memoranda before committees of the Missouri House of Representatives and Senate concerning the language and intent of MUTSA, which were consistent with the opinions expressed in this article. He is also the author of the trade secrets section of the chapter of The Missouri Bar Deskbook referenced in endnote 5.

Clayton R. Zak
Clayton R. Zak is a lawyer with Sandberg Phoenix & von Gontard P.C. practicing intellectual property law.

Assisting with review of and suggested edits to this article was Timothy C. Sansone, a shareholder with Sandberg Phoenix & von Gontard P.C. practicing appellate practice and complex litigation.

Despite the intended effects of MUTSA and the language of the statute, Missouri courts have continued to rely on the Restatement of Torts. As a result, Missouri courts may give inadequate consideration to trade secrets and the intent of expanded protection enacted into law with MUTSA. This result is exemplified in cases, such as Brown v. Rollet Bros. Trucking Co., in which courts find a lack of a trade secret in part by relying on factors or rules that predate and counter MUTSA. In Brown, the Missouri Court of Appeals had to determine if a rate sheet for pricing trucking services constituted a trade secret. The rate sheet considered factors such as shipping costs and fuel surcharges and was used to bid for jobs. The court determined that the rate sheet changed frequently and could not be a trade secret because, in part, the information on the rate sheet was not a process or device for continuous use in the business. This rationale — considering whether the subject information is for continuous use in a business — emanates directly from the Restatement of Torts and runs counter to the intent of MUTSA, which includes departing from the continuous use requirement to adopt a broader definition of a trade secret. It is entirely possible that the outcome in Brown could have been different had the court relied instead on MUTSA.

Intent of the Missouri Uniform Trade Secrets Act
Prior to MUTSA, Missouri law followed the Restatement of Torts adopted in 1939.⁵ In a typical pre-MUTSA example, the Missouri Court of Appeals applied the Restatement of Torts in A.B. Chance Co. v. Schmidt.⁶ The court quoted and considered the following factors from the Restatement of Torts in determining if a trade secret existed: “(1) the extent to which the information is known outside of his business; (2) the extent to which it is known by employees and others involved in his business; (3) the extent of measures taken by him to guard the secrecy of the information; (4) the value of the information to him and to his competitors; (5) the amount of effort or money expended by him in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.” Of particular interest is the court’s highlighting of the difficulty and expense — “research took over five years and cost in excess of $1 million” — in developing the trade secret.⁷ This point is relevant as a factor under the Restatement of Torts.

It should be emphasized that the Restatement of Torts, being adopted over 80 years ago, did not have robust treatment of trade secrets and did not contemplate the technological advancements of today. In fact, the Restatement of Torts addressed the definition of trade secrets only in a comment.⁸ These limitations in part motivated the Commissioners on Uniform State Laws to put forth model legislation updating the law regarding trade secret protection.

As trade secret law developed and the Restatement (Second) of Torts eliminated its treatment of trade secret law, the Commissioners on Uniform State Laws were further motivated to put forth model legislation for more modern treatment of trade secrets. The result was the Uniform Trade Secrets Act.⁹ Generally, the Uniform Trade Secrets Act took a more expansive view of what constitutes a trade secret and adopted a broader definition than that of the Restatement of Torts.¹⁰ The Uniform Trade Secrets Act focused on information that had value derived from its not being generally known and the reasonable efforts taken to maintain the secrecy of such information.¹¹ This focus eliminated the problems of the Restatement’s laundry list of examples and factors approach to defining a trade secret by taking a more expansive and better defined approach.¹²

MUTSA adopted the definition of trade secret from the Uniform Trade Secrets Act, with MUTSA defining a trade secret as:

[…] information, including but not limited to, technical or nontechnical data, a formula, pattern, compilation, program, device, method, technique, or process, that:
(a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use; and
(b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.¹³

MUTSA takes an even broader approach to defining trade secrets, inserting the “but not limited to” language not included in the Uniform Trade Secrets Act. This makes clear that the listing of the subsequent examples is just that: examples. MUTSA additionally goes further than the Uniform Trade Secrets Act by explaining that trade secret information includes “technical or nontechnical data” and takes a more expansive view of trade secrets by permitting them to be owned by nonprofit entities.¹⁴ The law under MUTSA also takes into consideration modern practices not considered by the Restatement of Torts. The Restatement of Torts, in its second factor, treats employee knowledge of the trade secret as a factor against finding a trade secret. This is outdated and does not contemplate the use of trade secret information by employees as a matter of course in modern companies. It has become common to allow employees or potential purchasers of an enterprise to have access to trade secrets under obligations of confidentiality. This reality is understood and considered by MUTSA, which defines misappropriation as the breach of a duty to maintain information secretly or limit its use.¹⁵ Thus, MUTSA contemplates that trade secrets may be shared within a company and outside a company under a duty to maintain its secrecy without compromising the protection afforded the trade secret.

MUTSA and the Uniform Trade Secrets Act employ a more expansive definition of trade secret, at least in that MUTSA and the Uniform Trade Secrets Act (1) add more and broader examples (e.g., “method,” “program,” and “technique”); (2) explicitly add business information generally to the definition of trade secret; and (3) eliminate the Restatement of Torts requirement that the trade secret be “continuously used in one’s business.”¹⁶ In crafting MUTSA, drafters considered writing a statute broader than the Restatement of Torts that can cover serendipitous discoveries and inventions that have value in their secrecy but may not require a large investment to generate.¹⁷ MUTSA, by implementing the Uniform Trade Secrets Act, adopted the intent of the Uniform Act to replace the Restatement of Torts.¹⁸

Missouri Courts’ Continued Reliance on the Restatement of Torts
Despite the legislature’s decision to move away from the Restatement of Torts, Missouri courts continue to rely on it. In some cases, courts continue to cite the Restatement of Torts and rely on the Restatement’s six-factor test for determining if a trade secret exists.¹⁹ By doing so, Missouri courts are not applying the language of MUTSA and its broader view of trade secrets.

Cases that rely on the Restatement of Torts generally fall into three categories. In the first category, courts cite the Restatement of Torts as consistent with MUTSA and for the purpose of interpreting MUTSA. These courts utilize the six-factor test, which results in a narrowed view of trade secrets in comparison to MUTSA. In the second category, courts obfuscate their reliance on the Restatement of Torts by citing case law that has in turn relied on the Restatement of Torts. In this second category, MUTSA and its broadening of trade secrets is de facto ignored by relying on case law only — case law that overlooks applying MUTSA and instead relies on the narrower Restatement six-factor test. In the third category, courts do not discuss or cite MUTSA while also adopting the Restatement of Torts’ definition of trade secret and the six-factor test. This article examines each category in turn, noting at the outset that there is some overlap among the categories due to the way in which Missouri courts have applied or construed MUTSA and/or the Restatement of Torts.

Category One – Citation to the Restatement of Torts
In the first set of cases that omit application of MUTSA, Missouri courts cite the Restatement of Torts and its six-factor test to determine if a trade secret exists.²⁰  By relying on the Restatement, these cases take a narrower definition of trade secret than MUTSA intended. For example, courts in this category of cases place weight on the fifth Restatement factor — “the amount of effort or money expended by him in developing the information,”²¹ contrary to the intent of MUTSA, which focuses on the value of the information to the holder and is broadened to include serendipitous discoveries.

In an exemplary case of this category, the court in Lyn-Flex West, Inc. v. Dieckhaus cited to the Restatement’s six-factor test, explaining that “[a]lthough the Restatement’s factors are not part of the Uniform Trade Secrets Act, the act essentially incorporates these factors in its definition of trade secrets.”²² The court goes on to cite cases in other jurisdictions that cite the Restatement in considering their implementation of the Uniform Trade Secrets Act.²³ But, the court in Lyn-Flex does not consider the differences between the Restatement of Torts and MUTSA and does not address the intentional broadening of what constitutes a trade secret.

The court went on to apply the Restatement’s six-factor test and gave particular weight to the fifth factor regarding the cost in developing the information. The court explained that “the book represented a compilation of many years of experience in the business of manufacturing insoles and thus a great deal of time and effort was obviously expended in its preparation.”²⁴ The use of this factor runs contrary to the intent of MUTSA to focus on the value of the secrecy of the information, not in the cost in preparing the information (e.g., such that accidental discoveries are protectable).

In turn, Lyn-Flex can allow courts to omit an analysis of MUTSA by citing Lyn-Flex and other cases relying on the Restatement of Torts.

Category Two – One Step Removed: Citation to Cases Relying on the Restatement of Torts
The bulk of cases that misapply MUTSA rely on foundational cases using the Restatement of Torts to characterize MUTSA, such as Lyn-Flex. Courts may cite Lyn-Flex and the six-factor test of the Restatement of Torts and continue to analyze those factors rather than MUTSA itself.²⁵

A typical example of this type of case is Am. Family Mut. Ins. Co. v. Missouri Dep’t of Ins.²⁶ In Am. Family, the court cited the Restatement’s six-factor test as guidance in determining whether a trade secret exists.²⁷ The court mentioned the Restatement in a footnote with no discussion as to the differences between it and MUTSA.²⁸ In denying a challenge to a finding that a trade secret existed, the court made specific note that the challenger “[made] no assertions related to the first, second, third, fifth, and sixth factors.”²⁹ The fifth factor referenced here is the cost in developing the trade secret, a factor that MUTSA intended to exclude from the analysis to provide trade secret protection to serendipitous discoveries.

In another typical example of these types of cases, the court in Cent. Tr. & Inv. Co. v. Kennedy³⁰ cited the six-factor test of the Restatement of Torts without mentioning the Restatement in any way.³¹ Rather, the court cited other cases as support for the six-factor test.³²

In the cases of this category, courts acknowledge MUTSA but apply the Restatement of Torts test/factors by citing either directly or indirectly to the six-factor test of the Restatement. This results in the application of factors (e.g., cost in preparing the information) that are contrary to MUTSA, and more importantly prevents development and analysis of the law of MUTSA.

Courts fail to apply principles that are consistent with MUTSA and contrary to the Restatement including, as discussed herein, by not: focusing on the value of the secret rather than the cost in preparing information; eliminating a continuous use requirement; protecting serendipitous discoveries; protecting non-profit entities; and allowing trade secrets to be shared under a duty to maintain their secrecy. The failure to apply these principles prevents development of the law around such principles to effectuate MUTSA’s intent to expand trade secret protection. More particularly, development and analysis of the law of MUTSA are stifled when courts do not explicitly cite and rely on it. MUTSA explicitly displaces conflicting tort “… and other laws of this state providing civil remedies for misappropriation of a trade secret.”³³ Thus, MUTSA makes it clear that it does not merely provide alternative definitions of trade secret principles but supplants them. Continued reliance on the Restatement factors is therefore contrary to the law of MUTSA and, given the differences in the two, harms development of the law, which is intended to broaden trade secret protection.

Category Three – Ignoring MUTSA
In a third category of cases, courts take their reliance on the Restatement of Torts further and ignore MUTSA.³⁴ In this category of cases, courts cite MUTSA directly and cite the six-factor test indirectly by quoting cases analyzing those factors and without mentioning that the factors come from the Restatement of Torts,³⁵ or courts rely on the Restatement directly and completely ignore applying the language of MUTSA.³⁶

In one exemplary case, the Supreme Court of Missouri in Healthcare Servs. of the Ozarks, Inc. v. Copeland³⁷ explained that “Missouri courts have found the following factors should be considered in determining whether given information is a trade secret . . .” and proceeded to list the Restatement’s six factors.³⁸ The Court cited only cases that predated MUTSA and thus ignored applying MUTSA’s language.³⁹

In a more tangential reference to MUTSA, the court in Brown v. Rollet Bros. Trucking Co. cited the six-factor test “to be considered in determining whether certain information is a trade secret.”⁴⁰ The court also noted MUTSA’s definition of a trade secret in a footnote, while explaining: “[t]his definition has also been used in analyzing trade secrets as a basis for enforcing covenants not to compete.”⁴¹

The court in Brown went on to explicitly cite and rely on the definition of trade secret from the Restatement of Torts, explaining that:

In National Rejectors, the Missouri Supreme Court, sitting en banc, set out the definition of trade secret from the Restatement of Torts section 757 (1934), as representing a consensus view. 409 S.W.2d at 18–19. A long line of Missouri cases has since quoted and applied all or parts of this definition.⁴²

This is similar to the second category of cases discussed above, but in Brown, the court went further than the cases it cited by stating the definition of trade secret from the Restatement of Torts, including the temporal limitation that “[a] trade secret is a process or device for continuous use in the operation of the business.”⁴³ This brings to mind that MUTSA specifically removed this temporal requirement for finding a trade secret. The comments to the Uniform Trade Secret Act, on which MUTSA is based, explain that “[t]he definition of ‘trade secret’ contains a reasonable departure from the Restatement of Torts (First) definition which required that a trade secret be ‘continuously used in one’s business.’”⁴⁴ Information that has not been used yet or may be used again, and information of a negative result are intended to be protectable.⁴⁵ Such an approach provides trade secret protection for laboratory results and basement inventor’s efforts that have not been used in business, much less continuously used in business.

The court in Brown relied on this limiting portion of the definition from the Restatement of Torts to find that a trade secret did not exist. The court explained that “the information contained on the rate sheet was not a process or device for continuous use in the business; rather, it consisted of frequently changing rates and fuel surcharges.”⁴⁶ (Emphasis added). This reasoning relies on the Restatement of Torts’ statement that trade secrets do not include “information as to single or ephemeral events in the conduct of the business.”⁴⁷

Continuing to rely on the Restatement of Torts allows for the consideration of factors and definitional terms that narrow trade secret protection from that intended by the broadened MUTSA.

Opposing Views
Some may consider these points to be exaggerated and take, instead, the position that there is no real harm in considering the factors of the Restatement of Torts. After all, these are only factors in determining whether a trade secret exists; why should courts not use all tools available to them, including years of earlier case law?

But this position misses the point of MUTSA and the conflicting views of trade secrets expressed by MUTSA and the Restatement of Torts. As previously noted, MUTSA expressly supplants prior law including the Restatement’s factor test. This change was made intentionally given the belief that MUTSA was required to address the overly restrictive and outdated view of trade secrets found in the Restatement. Further, portions of MUTSA run directly counter to some of the factors found in the Restatement. Therefore, courts cannot continue to rely on the Restatement’s factors as merely a supplementary tool because analyzing those factors contributes to reaching conclusions directly at odds with MUTSA and its intent. As previously mentioned, MUTSA focuses on the value of the secret rather than the cost in preparing information; eliminates a continuous use requirement; protects serendipitous discoveries; protects non-profit entities; and allows trade secrets to be shared under a duty to maintain its secrecy. Due to the sheer number of contradictions between MUTSA and the Restatement of Torts, continued reference to the Restatement can only be detrimental.

Furthermore, continued reliance on the Restatement of Torts thwarts another purpose of MUTSA, which is “making uniform the law with respect to the subject of trade secrets among states enacting [uniform trade secret acts].”⁴⁸

For these reasons, continued reliance on the Restatement of Torts is not a “beneficial additional tool” and is not harmless, but rather hampers development of the law under MUTSA and furthers analysis that is contrary to the principles of MUTSA. It also prevents uniformity of law among states.

Conclusion
Over 25 years ago, Missouri adopted a modified version of the Uniform Trade Secrets Act in MUTSA. In the following quarter-century, Missouri courts have not fully noted the differences between MUTSA and the Restatement of Torts’ definitions and have not focused on the intent of MUTSA to expand what information is protectable as a trade secret. As a result, Missouri courts continue to take an overly restrictive approach to trade secrets that is inconsistent with MUTSA. Reliance on and citation to the Restatement of Torts should discontinue for the more expansive trade secret protection afforded by MUTSA to take hold.

Endnotes

1 McPherson D. Moore is a shareholder of the law firm Sandberg Phoenix & von Gontard P.C. practicing intellectual property law. He was the principal drafter of MUTSA and was chair and co-chair of The Missouri Bar Patent, Trademark and Copyright Committee during the three-year period that MUTSA was proposed for enactment.  During that period, he testified and presented memoranda before committees of the Missouri House of Representatives and Senate concerning the language and intent of MUTSA, which were consistent with the opinions expressed in this article. He is also the author of the trade secrets section of the chapter of The Missouri Bar Deskbook referenced in endnote 5.

2 Clayton R. Zak is a lawyer with Sandberg Phoenix & von Gontard P.C. practicing intellectual property law.

3 Assisting with review of and suggested edits to this article was Timothy C. Sansone, a shareholder with Sandberg Phoenix & von Gontard P.C. practicing appellate practice and complex litigation.

4 Trademarks, Names and Private Emblems—Uniform Trade Secrets Act, 1995 Mo. Legis. Serv. S.B. 80 & 88 (Vernon’s).

5 See Missouri Bar Deskbook, Business Organizations, Vol. III, Chapter 30, IV Trade Secrets, § 30.82; See, e.g., A.B. Chance Co. v. Schmidt, 719 S.W.2d 854, 858 (Mo. App. W.D. 1986).

6 A.B. Chance, 719 S.W.2d at 857-58.

7 Id. at 858.

8 Restatement of Torts § 757, comment b.

9 Ramon A. Klitzke, The Uniform Trade Secrets Act, 64 Marq. L. Rev. 277, 283-84 (1980).

10 See, e.g., id. at 284-89; and Uniform Trade Secrets Act with 1985 Amendments, Comment to § 1 Definitions, National Conference of Commissioners on Uniform State Laws (Annual Conference 1985).

11 Id. at § 1; The Uniform Trade Secrets Act, 64 Marq. L. Rev. 277, 285.

12 Klizke, supra note 9, 287-89.

13 Mo. Ann. Stat. § 417.453(4); Uniform Trade Secrets Act with 1985 Amendments.

14 Compare Mo. Ann Stat. § 417.453(3) (permitting entities that are not for profit to hold trade secrets) with Uniform Trade Secrets Act with 1985 Amendments §§ 1(3) and 1(4)(i) (lacking such a broadening definition and requiring that a trade secret derive independent economic value).

15 Mo. Ann. Stat. § 417.453(2).

16 The Uniform Trade Secrets Act, 64 Marq. L. Rev. 277, 285-88 (1980); Uniform Trade Secrets Act with 1985 Amendments, Comment to § 1 Definitions, National Conference of Commissioners on Uniform State Laws (Annual Conference 1985).

17 Missouri Bar Deskbook, Business Organizations, Vol. III, Chapter 30, IV Trade Secrets, § 30.83.

18 See, e.g., Parker v. Petrovics 2020 WL 3972761, at *9 (N.D. Ala. July 14, 2020); Madison Oslin, Inc. v. Interstate Res., 2012 WL 4730877, at *5 (N.D. Ala. Sept. 30, 2012); Uniform Trade Secrets Act with 1985 Amendments, Prefatory Note, National Conference of Commissioners on Uniform State Laws (Annual Conference 1985).

19 Lyn-Flex W., Inc. v. Dieckhaus, 24 S.W.3d 693, 698 (Mo. App. E.D. 1999); Am. Family Mut. Ins. Co. v. Missouri Dep’t of Ins., 169 S.W.3d 905, 910 n.4 (Mo.  App. W.D. 2005).

20 Lyn-Flex W., Inc. v. Dieckhaus, 24 S.W.3d 693, 698 (Mo.  App. E.D. 1999); Am. Family Mut. Ins. Co. v. Missouri Dep’t of Ins., 169 S.W.3d 905, 910 n.4 (Mo. App. E.D. 2005).

21 Lyn-Flex W., Inc. v. Dieckhaus, 24 S.W.3d 693, 698 (Mo. App. E.D. 1999).

22 Id.

23 Id.

24 Id. at 699.

25 Am. Family Mut. Ins. Co. v. Missouri Dep’t of Ins., 169 S.W.3d 905, 909-10 (Mo. App. W.D. 2005); Cent. Tr. & Inv. Co. v. Kennedy, 2013 WL 268687, at *5 (Mo. App. S.D. Jan. 24, 2013); Reliant Care Mgmt., Co. v. Health Sys., Inc., 2011 WL 4342619, at *7-*8 (E.D. Mo. Sept. 15, 2011); State ex rel. Coffman Grp., L.L.C. v. Sweeney, 219 S.W.3d 763, 769 (Mo. App. E.D. 2005).

26 169 S.W.3d 905 (Mo. App. W.D. 2005).

27 Id. at 909-10.

28 Id. at 909-10 n.4.

29 Id at 910.

30 No. SD31658, 2013 WL 268687 (Mo. App. W.D. Jan. 24, 2013).

31 Id. at *5.

32 Id.

33 Mo. Ann. Stat. § 417.463(1).

34 See, e.g., Healthcare Servs. of the Ozarks, Inc. v. Copeland, 198 S.W.3d 604, 610-11 (Mo. banc 2006); Brown v. Rollet Bros. Trucking Co., 291 S.W.3d 766, 776 (Mo. App. E.D. 2009).

35 Healthcare Servs. of the Ozarks, Inc. v. Copeland, 198 S.W.3d 604, 610-11 (Mo. banc 2006) (citing a pre-MUTSA case relying on the Restatement of Torts’ six-factor test).

36 Brown v. Rollet Bros. Trucking Co., 291 S.W.3d 766, 776 (Mo. App. E.D. 2009) (relying on the Restatement of Torts, mentioning MUTSA only in a footnote as an alternative analysis, and proceeding to rely on Restatement definition).

37 198 S.W.3d 604 (Mo. banc 2006).

38 Id. at 610-11.

39 Id. (citing Continental Research Corp. v. Scholz, 595 S.W.2d 396, 400–01 (Mo. App. E.D.1980) (citing National Rejectors Inc. v. Trieman, 409 S.W.2d 1, 18-19 (Mo. banc 1966)).

40 Brown v. Rollet Bros. Trucking Co., 291 S.W.3d 766, 776 (Mo. App. E.D. 2009).

41 Id. at 776 n. 2.

42 Id. at 778 (citing to, among other cases, Healthcare Servs. of the Ozarks, Inc. v. Copeland, 198 S.W.3d 604 (Mo. banc 2006)).

43 Id. at 779 (quoting Restatement of Torts § 757 (1934) and Nat’l Rejectors, Inc. v. Trieman, 409 S.W.2d 1, 18-19 (Mo. banc 1966)).

44 Uniform Trade Secrets Act with 1985 Amendments, Comment to § 1 Definitions, National Conference of Commissioners on Uniform State Laws (Annual Conference 1985).

45 Id.

46 Brown, 291 S.W.3d at 779.

47 Restatement of Torts § 757, comment b.

48 Mo. Ann. Stat. § 417.465.