Trade Secrets Must Be Clearly Defined and Supported

A Utah court cautioned the tech industry against running to courts to preserve trade secrets without evidence supporting that a trade secret exists. A federal judge in Utah offered sharp rebukes to Applied Predictive Technologies Inc. (APT), an analytics provider acquired by MasterCard in 2015, over how the company pursued its failed trade secrets case against its "only serious competitor in the market." After seven years of aggressive litigation by APT, Judge Jill Parrish of the U.S. District Court for the District of Utah ordered APT to pay its rival $2.8 million for prevailing party attorneys' fees. Applied Predictive Technologies Inc. v. MarketDial Inc. et al., Case No. 2:19-CV-00496 (D. Utah. March 25, 2025).

APT sued MarketDial in 2018, accusing both the Utah startup and its founders of misappropriating APT's confidential information and trade secrets that they allegedly gained access to while consulting for APT during their employment as consultants at McKinsey & Co. Though the two MarketDial founders were privy to APT confidential information during their time at McKinsey, the court found after an intensive discovery process that there was no evidence to support that the defendants had access to APT's trade secrets, much less misappropriated them.

Judge Parrish explained that APT could not define a single trade secret. The court found that APT sought to establish its trade secret claim by keeping it undefined and ambiguous without ever meaningfully disclosing the specific secret it sought to protect.

The court concluded that APT's trade secret misappropriation claims were 1) objectively specious and 2) subjectively made in bad faith. The court noted that under both the Defend Trade Secrets Act and Utah Uniform Trade Secrets Act, "there is no basis for a trade secret claim when a plaintiff cannot show that a trade secret exists." Even though the claim superficially appeared to have merit from the outset, it lacked any evidentiary support. Although APT argued that there was substantial evidence supporting its trade secret claims, none of the evidentiary submissions supported that it actually had an identifiable trade secret.

Judge Parrish also found that APT's claims were "subjectively made in bad faith because APT knew or was reckless in not knowing that its claim for trade secret misappropriation had no merit." The court ruled that APT failed to withdraw its trade secret claims when it became apparent that it had no evidence to support them. Instead, APT did the opposite. "It sought to aggressively litigate every issue, flooding the docket with motions and documents of so called 'evidence' that amounted to nothing," Judge Parrish said, adding, "it was apparent that this was done to put an upstart competitor out of business because no other motive could explain the amount of time and money it invested in litigation of a fruitless claim. APT, a successful tech company, acquired for $600 million, had the resources to outlitigate MarketDial."

Conclusion

The court granted the defendants' motions for summary judgment and entered a judgment in favor of the defendants, concluding that summary judgment was appropriate because APT failed to identify a trade secret.

A key takeaway from Judge Parrish's decision is that even if trade secret claims appear to have merit from the outset, the trade secret at the heart of a plaintiff's claim must be identified, clearly defined and supported with evidence. Otherwise, under the Defend Trade Secrets Act, the court may "award reasonable attorney's fees to the prevailing party" if it finds "a claim of misappropriation is made in bad faith." 18 U.S.C. § 1836(b)(3)(D).

Oftentimes, trade secret plaintiffs want to protect the trade secret but do not want to disclose what the secret is, which can be a difficult needle to thread. This case cautions against filing suit unless a trade secret plaintiff is prepared to disclose in discovery the nature of the trade secret, understanding that the plaintiff can seek some confidentiality protections in court but that, ultimately, there is some risk of exposure. This case highlights what can happen when a plaintiff goes to court on a trade secret claim but is not prepared to disclose the nature of what it seeks to protect.