An industrial powder coating service in Texas is looking to take the inventor behind the company's bread and butter - its trade secrets - allegedly took them to start a rival company.
In a lawsuit filed last week, Corrosion Prevention Technologies, a company that specializes, as the name suggests, in corrosion prevention technology, accused former employees, Loren Hatle, Santiago Hernandez, and Timothy Mulville of taking the company's intellectual property on their way out the door.
In the suit, the company claims the employees took almost everything pertaining to its corrosive resistance technology, CorrX, information, including product information, specifications, manuals, methods, formulas, compositions, application process and procedures, technology, data, know-how, reports, analyses, compilations, records, notes, presentations, summaries, and studies relating to the technology. The company's technology has made it an "industry pioneer," according to the lawsuit. CorrX is essentially a gel and powder combo that removes corrosion and rust and leaves surfaces clean for protecting further.
Hatle, resigned in September 2014 from a company, CorrLine, that was ultimately acquired by Corrosion Prevention Technologies. Hernandez and Mulville resigned around the same time. Upon resigning, Hatle formed a handful of new companies, Bear Metal Technologies, MicroClean Metals, WirxGroup, and Corrosion Exchange, designed in some capacity to compete with CPT; the companies used the company’s “intellectual property, proprietary, and confidential information,” the suit alleges.
Hatle is listed as a co-inventor on some of the patents belonging to the CorrX technology. According to the lawsuit, he agreed to transfer the rights of the patents to CPT in December 2014, shortly after leaving the company but failed to deliver all of the papers required to vest the rights of one patent, and any additional patent applications assigned to CPT.
While the document doesn't get into specifics around how Hatle and the defendants may have stolen the data – the suit claims they did it on “information and belief” – it alleges the individuals copied and altered some of its marketing documents and reference letters, pirated a version of CorrLine's environmental run-off study, and further promotional material.
CPT is suing the ex-employees for violating the Lanham Act, a statute that governs trademarks, service marks and unfair competition the Defend Trade Secrets Act, which claims the trade secrets the individuals copied and retained CPT's trade secrets while still employed there, and the Texas Uniform Trade Secrets Act
The lawsuit also alleges the individuals are guilty of misappropriation, breach of contract, and conversion - a tort - the civil equivalent of criminal theft charges.
CPT claims it took reasonable steps to protect its trade secrets - it made the individuals sign confidentiality agreements, maintained secure networks and databases, and limited access to data in general - but the defendants still managed to take the data through “improper means.”
The confidentiality agreements, referenced in the suit, cover “product information, specifications, manuals, formulas, compositions, application process and procedures, technology data ... trademarks and other intellectual property, reports, analyses ... studies and other materials.” While broad, the lawsuit claims the defendants took just that – “product information, specifications, manuals, methods, formulas, compositions, application process and procedures, technology, data, know-how, reports, analyses, compilations, records, notes, presentations, summaries, studies and other materials" relating to CorrX.
The word "copied" in the lawsuit suggests there may have been some technical level of theft, either via USB or e-mail, at play here. Again, while it’s unclear how the individuals purportedly took the data, it doesn’t seem like there were any safeguards in place to prevent it from happening beyond a simple confidentiality agreement.
As we've seen time and time again, confidentiality agreements are not a silver bullet when it comes to preventing data theft; a signature and legalese alone can't stop an anxious or disgruntled employee from absconding with what they think is theirs.
IP Protection for Trade Secret Theft
This case shows how quickly valuable intellectual property can be at risk when employees move to new companies, even if confidentiality agreements exist. To protect sensitive data, companies need more than just contracts. Strong technical and operational controls are essential throughout the data’s lifecycle. Using effective IP protection tools helps organizations track who accesses important information, spot unusual data activity, and lower the chance of unauthorized copying or leaks. These steps help keep trade secrets safe, even in workplaces with frequent staff changes or higher risks.
