Brokers, Tenants Wanting to Protect Trade Secrets Should Address Them in Agreements
Confidentiality and non-disclosure obligations in a written agreement could be what saves a trade secret misappropriation claim from being dismissed. Applying both the Federal Defend Trade Secrets Act and State Pennsylvania Uniform Trade Secrets Act, a judge for the U.S. District Court for the Western District of Pennsylvania, for the third and final time, dismissed with prejudice claims for trade secret misappropriation where the alleged trade secret information was contained in underlying ground leases that never included either confidentiality and/or non-disclosure provisions. Vertical Bridge REIT, LLC, et al. v. Everest Infrastructure Partners, Inc., et al., Case No. 2:23-CV-01017-WSH (W.D. Pa. Feb. 20, 2025).
In Vertical Bridge, the plaintiffs and their subsidiaries own and operate towers and lease space on those towers to telecommunication tenants. Those towers usually sit on leased property, and the plaintiffs have ground-lease agreements with individual landlords. The defendants have a business of tower aggregation where they seek to be the middlemen between the plaintiffs and their landlords. In so doing, the defendants sought to review the ground lease agreements between the plaintiffs and their landlords. Via the lawsuit, the plaintiffs alleged that the defendants engaged in a form of illegitimate tower aggregation and induced the plaintiffs' landlords to share "valuable, proprietary, and confidential financial information in their ground leases." The plaintiffs sought damages against the defendants for various causes of action, including trade secret misappropriation based on the information contained in those ground leases.
In in his ruling, Judge W. Scott Hardy stated that any leases without confidentiality and/or non-disclosure provisions (or, as he called them, the "Type 4" leases) "lack adequate reasonable-measure allegations for the [plaintiffs] to pursue trade-secret claims based on the information in those agreements." Because the plaintiffs "failed to include or add any explicit provision to leases reflecting an expectation of privacy," the court refused to find that the plaintiffs alleged a trade secret claim and dismissed the claim as to those leases with prejudice.
The judge also considered – and rejected – the plaintiffs' argument that the confidential information subject to those "Type 4" leases, without confidentiality provisions, can support a claim for trade secret misappropriation based on "industry practice," stating: "[W]here the allegations show that – with respect to the Type 4 leases – the [plaintiffs] failed to include or add any explicit provision to leases reflecting an expectation of privacy, the Court will not find a trade secret claim has been plausibly alleged."
Conversely, Judge Hardy addressed three other types of leases (as he called them, "Type 1," "Type 2" and "Type 3") and found that the plaintiffs maintained a cause of action for trade secret misappropriation as to those three "types" of leases because 1) the leases had been subject to confidentiality provisions during the negotiation process and had confidentiality agreements in the leases, 2) the leases came with confidentiality provisions when they were inherited by the plaintiffs or 3) the plaintiffs inherited leases without a confidentiality or non-disclosure agreement but worked to add one to the inherited lease.
Judge Hardy's ruling provides a valuable reminder to drafters looking to help ensure certain information remains protected by including confidentiality and non-disclosure provisions in all types of agreements – even leases – that may even tangentially relate to confidential or trade secret information. In this specific context, tenants should be aware that confidentiality and non-disclosure provisions are more than boilerplate language, but could be essential for protecting proprietary or confidential information. Though this is likely not the only consideration a court will review in making a determination on whether trade secrets are protected, it appears from Judge Hardy's ruling that lack of a confidentiality and/or non-disclosure provision could be what causes information to lose its protected status and a legal claim stemming therefrom.
