Integrated Cash Management v. Digital Transactions

Synopsis
Integrated Cash Management Services, Inc. v. Digital Transactions, Inc., 902 F.2d 171 (1990), is a case decided by the United States Court of Appeals Second Circuit. The court affirmed the judgement of the district court which held that trade secret protection can be extended to the manner in which, several non-secret programs are arranged in a confidential way to produce a unique software product.

Background
Integrated Cash Management (ICM) is a software company that designs and develops computer software programs. ICM customizes these generic programs to suit the needs of its clients. ICM claims that while the programs themselves may not be protected as trade secrets, the specific combination that they developed should be protected.

Defendants Newlin and Vafa, computer programers with ICM until 1987, worked on several of the generic programs that ICM produced. In 1987 both Newlin and Vafa left ICM and began working for Digital Transactions inc. (DTI). Both defendants signed a nondisclosure agreement with ICM, in which they agreed not to disclose or use any confidnetial or proprietary information once they left the employ of ICM.

Prior to leaving ICM Newlin and Vafa copied certain files that they had worked on. Two weeks after Newlin and Vafa began work at DTI, DTI began to create a prototype database program similar to that used by ICM, as well as several other programs created by ICM.

Decision
The court of appeals held that ICM's software produce was a trade secret and affirmed the perpetual injunction aimed at preventing defendants from distributing those programs that were unlawfully obtained from ICM.

The court held that the manner in which ICM's programs intereact is the key to the products success and is not generally known outside of ICM. In addition, the court held that ICM had satisfied sufficient factors as to the protection of its secrect.

Defendants argued that the programs that make up the product are in the public domain and should not be protected as trade secrets, however; the court held :

"a trade secret can exist in a combination of characteristics and components, each of which, by itself, is in the public domain, but the unified process, design and operation of which, in unique combination, affords a competitive advantage and is a protectable secret."

The court also held that ICM had taken reasonable measures to protect the secrecy of its product, citing such factors as locking the doors of the premises, and requiring employees, including Newlin and Vafa, to sign nondisclosure agreements.