Willful And Malicious Misappropriation

By By Craig Matthews, Esq., with assistance from Mary Kraft Corporate Law

Ohio recognizes the tort of Misappropriation of Trade Secrets, which occurs when someone with a duty to maintain secrecy discloses trade secret information to a third party.¹ A trade secret can include a business’s list of client names and contact information, formulas, methods, programs, or other types of information that gives a company an economic advantage over its competitors.² Typically, when a defendant is found to have misappropriated a plaintiff’s trade secrets, the plaintiff is awarded damages based on their actual loss or the unjust benefit received by the defendant.³

However, if the plaintiff can prove that the defendant’s conduct constituted willful and malicious misappropriation, the plaintiff may be entitled to punitive damages. Courts have interpreted willful and malicious to mean “actual malice,” which is defined by its common and ordinary meaning.⁴ Merriam-Webster defines malice as “intent to commit an unlawful act or cause harm without legal justification or excuse.” ⁵ If you believe that your trade secrets have been misappropriated, or if you are facing potential liability for having misappropriated another’s trade secrets, the following survey of Ohio case law is informative to observe how Ohio courts have considered willful and malicious misappropriation.  

In Boehm v. Black Diamond Casino Events, LLC, the First District Court of Appeals found that Boehm’s misappropriation of Black Diamond’s trade secrets was not malicious or without just cause.⁶ In that case, Boehm provided his accountant with Black Diamond’s financial records, to allow his accountant to assess the profitability of an investment with Black Diamond.⁷ Black Diamond did not allow anyone to view their financial records without first signing a nondisclosure agreement.⁸ As such, Black Diamond told Boehm that his accountant was required to sign a nondisclosure before reviewing their records.⁹ However, Boehm shared the records without obtaining an executed nondisclosure agreement.¹⁰ Although the court found this was a misappropriation of trade secrets, it ruled that the evidence did not support a finding of willful and malicious conduct. Important to its decision, the court noted that Black Diamond knew Boehm was going to share the records, and the misappropriation was not without just cause because Boehm shared the records with his accountant to determine whether or not he would make an investment with Black Diamond.¹¹ 

Similarly, in Becker Equip. v. Flynn, the Twelfth District Court of Appeals found the defendant’s conduct did not rise to willful and malicious misappropriation.¹² There, the defendant was fired from his former employer for sexual harassment.¹³ The defendant subsequently started his own company and acquired his former employer’s largest customer.¹⁴ At trial, the jury found that the defendant acted with malice with respect to the former employer’s defamation claim. The jury further found that the defendant misappropriated plaintiff’s customer information, however the jury only awarded one dollar for that claim.¹⁵ The former employer

¹ ORC 1333.61(B)(2)(b).
² https://www.investopedia.com/terms/t/trade-secret.asp
³ ORC 1333.63(A).
⁴ Boehm v. Black Diamond Casino Events, LLC, 2018-Ohio-2379, 116 N.E.3d 704, ¶ 14 (1st Dist. 2018).
⁵ https://www.merriam-webster.com/dictionary/malice
⁶ 2018-Ohio-2379, 116 N.E.3d 704, ¶ 15 (1st Dist. 2018).
⁷ Id.
⁸ Id.
⁹ Id at ¶ 12.
¹⁰ Id.
¹¹ Id at ¶ 15.
¹² Becker Equip. v. Flynn, 12th Dist. Butler No. CA 2002-12-313, 2004-Ohio-1190, ¶ 16 (2004).
¹³ Id. at ¶¶ 2-3.
¹⁴ Id. at ¶ 3.
¹⁵ Id. at ¶ 7.