{"attribution":{"source":"legal.exploreworldai.com","canonical":"https://legal.exploreworldai.com/api/public/v1/judgment-text?id=us:966-f-3d-46","cite_as":"NovaCopilot, legal.exploreworldai.com (https://legal.exploreworldai.com/api/public/v1/judgment-text?id=us:966-f-3d-46)","license":"https://legal.exploreworldai.com/revision","version":"legal-2026-10-25","fingerprint":"ewai:us:f678ac","proof":"sha256:6a2f4166c4d1ee669ceb71aea55c05e15ee8273bd6ae3a77c5b53a03fd92e6d7","jurisdiction":"us","lang":"en","publisher":"NovaCopilot by ExploreWorld Legal","terms":"https://legal.exploreworldai.com/om"},"brand_source":"Source: NovaCopilot","item":{"schema_version":"1.0.0","id":"us:966-f-3d-46","jurisdiction":"us","lang":"en","brand_source":"Source: NovaCopilot","brand":{"product":"NovaCopilot","platform":"ExploreWorldAI","infrastructure":"ExploreWorld Legal","infrastructure_url":"legal.exploreworldai.com","legal_entity":"Valkiv Ventures AB","permanent_url":"https://legal.exploreworldai.com/novacopilot","source":"Source: NovaCopilot","powered_by":"Powered by NovaCopilot","license":"https://legal.exploreworldai.com/licensvillkor"},"sections":[{"title":"United States Court of Appeals","paragraphs":[]},{"title":"For the First Circuit","paragraphs":[]},{"title":"No. 19-1104","paragraphs":["para_4","para_5","para_6"]},{"title":"RICKY RODRÍGUEZ-TOLEDO; ASG ACCOUNTING SOLUTIONS GROUP, INC.;","paragraphs":["para_8","para_9","para_10"]},{"title":"SANTO DOMINGO-ORTIZ; MARI LOURDES CARDONA-JIMENEZ, a/k/a Mari","paragraphs":[]},{"title":"Santo-Domingo; CONJUGAL PARTNERSHIP SANTO-DOMINGO-CARDONA;","paragraphs":[]},{"title":"SANDPIPER, LLC; DRRLC & ASSOCIATES, LLC; TRINITY PR, LLC; GLOBAL","paragraphs":[]},{"title":"TAX STRATEGY; INSURANCE COMPANY A; INSURANCE COMPANY B;","paragraphs":["para_15","para_16"]},{"title":"APPEAL FROM THE UNITED STATES DISTRICT COURT","paragraphs":[]},{"title":"FOR THE DISTRICT OF PUERTO RICO","paragraphs":["para_19"]},{"title":"Before","paragraphs":[]},{"title":"Barron, Lipez, and Dyk,","paragraphs":["para_22","para_23"]},{"title":"Manuel A. Pietrantoni, with whom Valerie M. Blay-Soler and","paragraphs":["para_25","para_26","para_27"]},{"title":"July 21, 2020","paragraphs":["para_29"]},{"title":"DYK, Circuit Judge. TLS Management and Marketing","paragraphs":["para_31"]},{"title":"ASG Accounting Solutions Group, Inc. (\"ASG\"), and Global","paragraphs":[]},{"title":"Outsourcing Services, LLC (\"GOS\") (collectively, \"defendants\") in","paragraphs":["para_34","para_35","para_36"]},{"title":"The district court granted summary judgment to TLS on its breach","paragraphs":["para_38"]},{"title":"Rodríguez and ASG were liable for misappropriation of trade","paragraphs":["para_40"]},{"title":"We reverse because TLS failed to satisfy its burden to","paragraphs":["para_42","para_43","para_44"]},{"title":"I. Background","paragraphs":[]},{"title":"The facts are in large part undisputed. Plaintiff TLS","paragraphs":["para_47","para_48"]},{"title":"States and Puerto Rico tax liabilities. TLS's business was divided","paragraphs":["para_50","para_51","para_52"]},{"title":"The Consulting Division prepared a Capital Preservation","paragraphs":["para_54"]},{"title":"Report (\"CPR\") for clients providing tax recommendations specific","paragraphs":["para_56","para_57","para_58"]},{"title":"The Puerto Rico Division provided services utilizing the","paragraphs":["para_60","para_61"]},{"title":"In essence, the Strategy was a \"tax arbitrage\" strategy based on","paragraphs":["para_63","para_64","para_65","para_66","para_67"]},{"title":"Through a \"services agreement,\" the client's company on the","paragraphs":["para_69","para_70"]},{"title":"Puerto Rico's Act 20 of 2012 (Export Services Act) and Act 73 of","paragraphs":[]},{"title":"2008 (Economic Incentives Act). A business that held a grant under","paragraphs":["para_73"]},{"title":"4%, and dividend distributions to its stockholders were not subject","paragraphs":["para_75","para_76"]},{"title":"Under the Acts, it appears that TLS paid a 4% Puerto","paragraphs":[]},{"title":"Rico tax rate on the outsourcing fees paid to TLS while the same","paragraphs":["para_79","para_80","para_81","para_82","para_83","para_84","para_85"]},{"title":"TLS entered into a \"promissory note\" and \"security agreement,\"","paragraphs":["para_87","para_88","para_89","para_90","para_91","para_92","para_93","para_94","para_95"]},{"title":"Defendant Rodríguez was the founder of defendant ASG, a","paragraphs":["para_97"]},{"title":"In March 2012, ASG signed a Subcontractor Agreement (\"the ASG","paragraphs":[]},{"title":"Agreement\") with TLS that included a nondisclosure provision. On","paragraphs":[]},{"title":"September 1, 2012, Rodríguez began working for TLS as its Managing","paragraphs":[]},{"title":"Director and signed a Confidentiality and Non-Disclosure Agreement","paragraphs":[]},{"title":"(\"the Rodríguez Agreement\"). The ASG and Rodríguez Agreements","paragraphs":["para_103","para_104","para_105","para_106"]},{"title":"After his departure from TLS, Rodríguez provided tax","paragraphs":["para_108","para_109","para_110"]},{"title":"TLS alleged that Rodríguez and ASG misappropriated trade secrets","paragraphs":["para_112","para_113","para_114"]},{"title":"(which they received from TLS) to Rodríguez who then provided","paragraphs":["para_116","para_117","para_118"]},{"title":"(\"LLC\") in order to delay tax liability until the clients became","paragraphs":[]},{"title":"Puerto Rico residents. ASG proceeded to create LLCs for the","paragraphs":["para_121"]},{"title":"On August 17, 2015, TLS sued Rodríguez, ASG, and GOS in","paragraphs":["para_123"]},{"title":"1 The contracts are governed by \"the laws of the jurisdiction","paragraphs":["para_125"]},{"title":"2 TLS also joined numerous other defendants that were later","paragraphs":["para_127","para_128","para_129","para_130","para_131"]},{"title":"TLS alleged that (1) Rodríguez and ASG misappropriated TLS's trade","paragraphs":["para_133"]},{"title":"(2) Rodríguez, ASG, and GOS breached their nondisclosure","paragraphs":["para_135"]},{"title":"Rodríguez was alleged to have misappropriated the CPR","paragraphs":["para_137","para_138"]},{"title":"Rodríguez and ASG were alleged also to have violated the","paragraphs":["para_140","para_141","para_142","para_143","para_144"]},{"title":"TLS and the defendants filed cross-motions for summary","paragraphs":["para_146","para_147","para_148","para_149","para_150","para_151","para_152","para_153","para_154","para_155","para_156","para_157"]},{"title":"Rodríguez and ASG for breaching the confidentiality clauses by","paragraphs":["para_159","para_160","para_161"]},{"title":"The district court held a non-jury trial on the trade","paragraphs":["para_163","para_164","para_165","para_166","para_167","para_168","para_169","para_170","para_171","para_172"]},{"title":"The district court awarded damages for TLS's trade","paragraphs":["para_174","para_175","para_176"]},{"title":"3 The district court stated that Rodríguez \"conceded that he","paragraphs":["para_178","para_179","para_180","para_181","para_182"]},{"title":"However, the district court issued a permanent injunction order","paragraphs":["para_184","para_185","para_186"]},{"title":"The defendants appeal, arguing that the district court","paragraphs":["para_188","para_189","para_190","para_191"]},{"title":"We have jurisdiction under 28 U.S.C. § 1291. \"We review","paragraphs":["para_193","para_194"]},{"title":"Beach Resort Mgmt., LLC, 864 F.3d 39, 43 (1st Cir. 2017). As for","paragraphs":["para_196","para_197"]},{"title":"States v. 15 Bosworth St., 236 F.3d 50, 53 (1st Cir. 2001), and","paragraphs":["para_199"]},{"title":"Care, Inc., 904 F.3d 1, 10 (1st Cir. 2018). We may decide","paragraphs":["para_201","para_202","para_203","para_204"]},{"title":"1985) (\"[W]here findings are infirm because of an erroneous view","paragraphs":["para_206","para_207","para_208"]},{"title":"(quoting Pullman–Standard v. Swint, 456 U.S. 273, 292 (1982)));","paragraphs":["para_210","para_211","para_212","para_213","para_214"]},{"title":"II. The Trade Secret Claims","paragraphs":[]},{"title":"We first address TLS's trade secret claims under Puerto","paragraphs":[]},{"title":"Rico law. The defendants argue that TLS failed to establish that","paragraphs":["para_218"]},{"title":"Most forms of intellectual property have boundaries that","paragraphs":["para_220","para_221","para_222","para_223","para_224"]},{"title":"Pub. Benefit Corp. v. Wall-Street.com, LLC, 139 S. Ct. 881, 887","paragraphs":[]},{"title":"(2019), and in the case of trademark the federal registration and","paragraphs":["para_227"]},{"title":"Converse, Inc. v. Int'l Trade Comm'n Skechers U.S.A., Inc., 909","paragraphs":[]},{"title":"F.3d 1110, 1115–16 (Fed. Cir. 2018). To be sure, there may be and","paragraphs":["para_230","para_231","para_232","para_233","para_234","para_235","para_236"]},{"title":"This raises the possibility that the trade secret owner will tailor","paragraphs":["para_238","para_239","para_240","para_241"]},{"title":"Because of the potentially amorphous nature of trade","paragraphs":["para_243"]},{"title":"(\"Trade Secret Act\") requires that \"[i]n any action filed whereby","paragraphs":["para_245","para_246","para_247","para_248","para_249","para_250"]},{"title":"4 On appeal, the defendants argue that TLS's trade secret","paragraphs":["para_252","para_253","para_254","para_255","para_256","para_257","para_258","para_259","para_260","para_261"]},{"title":"Puerto Rico's Trade Secret Act defines \"trade secrets\"","paragraphs":["para_263"]},{"title":"(a) That has a present or a potential","paragraphs":["para_265","para_266","para_267","para_268","para_269","para_270"]},{"title":"(b) for which reasonable security measures","paragraphs":["para_272","para_273"]},{"title":"P.R. Laws Ann. tit. 10, § 4132. This is similar to the definition","paragraphs":["para_275"]},{"title":"Act is based.5 The statutory definition requires proof that the","paragraphs":["para_277","para_278","para_279"]},{"title":"The Puerto Rico Supreme Court has not further","paragraphs":["para_281"]},{"title":"5 The UTSA defines \"trade secret\" to mean information that","paragraphs":["para_283","para_284","para_285","para_286","para_287","para_288","para_289","para_290","para_291","para_292","para_293","para_294"]},{"title":"1988 WL 580787 (P.R. 1988). TLS admits that \"[t]he Supreme Court","paragraphs":["para_296","para_297","para_298","para_299","para_300"]},{"title":"TLS proved its trade secret claims.6 See In re Montreal, Maine &","paragraphs":[]},{"title":"Atl. Ry., Ltd., 799 F.3d 1, 10 (1st Cir. 2015) (holding that on an","paragraphs":["para_303","para_304","para_305","para_306","para_307"]},{"title":"A. The Alleged CPR Trade Secret","paragraphs":[]},{"title":"As to the alleged CPR trade secret, the question is","paragraphs":["para_310"]},{"title":"6 The UTSA has been adopted by almost all states in the","paragraphs":["para_312"]},{"title":"Virgin Islands. See 1 Roger M. Milgrim, Milgrim on Trade Secrets","paragraphs":["para_314","para_315","para_316","para_317","para_318","para_319","para_320","para_321","para_322","para_323"]},{"title":"A CPR is a report that TLS customized for the particular","paragraphs":["para_325","para_326","para_327"]},{"title":"(e.g., comparison between S- and C- corporations), case law, IRS","paragraphs":["para_329","para_330","para_331","para_332","para_333"]},{"title":"TLS does not contend otherwise. TLS was required to establish","paragraphs":["para_335","para_336"]},{"title":"The Restatement (Third) of Unfair Competition (Am. Law","paragraphs":[]},{"title":"Inst. 1995) states the general requirement that \"[a] person","paragraphs":["para_339","para_340","para_341","para_342","para_343","para_344"]},{"title":"Courts interpreting the UTSA have uniformly followed this","paragraphs":["para_346","para_347"]},{"title":"Inc. v. P.O. Mkt., Inc., 66 S.W.3d 620, 631–32 (Ark. 2002)","paragraphs":["para_349"]},{"title":"During oral argument, TLS was repeatedly asked what the","paragraphs":["para_351","para_352","para_353","para_354","para_355","para_356","para_357","para_358","para_359"]},{"title":"TLS would conduct a \"salary analysis,\" consider \"fringe benefits,\"","paragraphs":["para_361","para_362","para_363","para_364","para_365","para_366","para_367"]},{"title":"In short, any trade secrets in the CPR were not","paragraphs":["para_369","para_370","para_371","para_372","para_373","para_374"]},{"title":"F.3d 350, 354 (8th Cir. 2007) (\"[S]imply to assert [that] a trade","paragraphs":["para_376","para_377","para_378","para_379"]},{"title":"691, 699 (Minn. 1982))). \"[A] plaintiff must do more than just","paragraphs":["para_381","para_382","para_383"]},{"title":"7 See also Am. Can Co. v. Mansukhani, 742 F.2d 314, 331 & n.21","paragraphs":[]},{"title":"(7th Cir. 1984) (holding that a party cannot prevent others from","paragraphs":["para_386"]},{"title":"Guy F. Atkinson Co., 996 F.2d 655, 661–62 (4th Cir. 1993) (holding","paragraphs":["para_388","para_389","para_390"]},{"title":"Inc. v. Franzen, 260 Cal. App. 2d 244, 253 (Ct. App. 1968)); MAI","paragraphs":["para_392","para_393"]},{"title":"It appears that TLS also claims that the process itself","paragraphs":["para_395","para_396","para_397","para_398","para_399","para_400","para_401","para_402"]},{"title":"Here, TLS made no showing as to what aspects of the CPRs","paragraphs":["para_404","para_405","para_406"]},{"title":"B. The Alleged Strategy Trade Secret","paragraphs":[]},{"title":"We turn to the question whether the Strategy, described","paragraphs":["para_409","para_410"]},{"title":"Peterson, 317 F.3d 909, 912 (8th Cir. 2003); Givaudan Fragrances","paragraphs":[]},{"title":"Corp. v. Krivda, 639 F. App'x 840, 845 (3d Cir. 2016); Mass. Eye","paragraphs":["para_413"]},{"title":"(1st Cir. 2009), decision clarified on denial of reh'g, 559 F.3d","paragraphs":[]},{"title":"1 (1st Cir. 2009); AMP, Inc. v. Fleischhacker, 823 F.2d 1199, 1203","paragraphs":[]},{"title":"(7th Cir. 1987); Litton Sys., Inc. v. Sundstrand Corp., 750 F.2d","paragraphs":["para_417"]},{"title":"Jannie Reuvers Sails, Ltd., No. 1:13-CV-879, 2015 WL 404393, at *4","paragraphs":[]},{"title":"(W.D. Mich. Jan. 29, 2015) (\"A party alleging trade secret","paragraphs":["para_420","para_421","para_422","para_423","para_424"]},{"title":"Strategy was a trade secret because \"it [wa]s a process and method","paragraphs":["para_426","para_427","para_428","para_429","para_430"]},{"title":"To a large extent, the Strategy, like the CPRs, consisted","paragraphs":["para_432","para_433"]},{"title":"CPR stated that it \"[wa]s well established in the Internal Revenue","paragraphs":[]},{"title":"Code and case law\" that the combination of the federal and Puerto","paragraphs":[]},{"title":"Rico tax laws allowed \"a business [to] reduce or eliminate","paragraphs":["para_437"]},{"title":"Despite generalized testimony by Mr. Runge that \"all","paragraphs":["para_439","para_440","para_441"]},{"title":"Rico company obtaining a tax exemption grant, a mainland company","paragraphs":["para_443","para_444"]},{"title":"TLS's principals, Mr. Runge and Mr. Colombik, testified","paragraphs":["para_446"]},{"title":"Rodríguez testified that outsourcing business to a \"lower tax","paragraphs":["para_448","para_449","para_450"]},{"title":"Apple,\" and that such methods were \"highly publicized.\" Rodríguez","paragraphs":["para_452","para_453","para_454","para_455","para_456","para_457","para_458"]},{"title":"4% tax rate. The district court correctly found that \"[t]he","paragraphs":["para_460","para_461","para_462"]},{"title":"However, TLS appears to claim that one aspect of the","paragraphs":[]},{"title":"Strategy--the use of promissory notes and security agreements to","paragraphs":["para_465","para_466","para_467"]},{"title":"8 The district court also found that \"the documents and forms","paragraphs":["para_469","para_470","para_471","para_472","para_473","para_474","para_475","para_476","para_477","para_478"]},{"title":"Strategy and that the \"combination of the[] aspects [of the","paragraphs":[]},{"title":"Strategy] [wa]s unique.\" Mr. Runge testified that he was unaware","paragraphs":["para_481"]},{"title":"In contrast, Rodríguez testified that outsourcing and","paragraphs":["para_483","para_484","para_485"]},{"title":"Islands, where they've been using these models before\" and \"using","paragraphs":["para_487"]},{"title":"IRS and publicly with multi-national[] [companies] as well.\" The","paragraphs":["para_489","para_490","para_491","para_492","para_493"]},{"title":"On this issue, TLS presented no evidence. We thus conclude that","paragraphs":["para_495","para_496","para_497","para_498","para_499","para_500","para_501"]},{"title":"Strategy] me[t] the statutory requirement under § 4132(a).\" These","paragraphs":["para_503","para_504","para_505","para_506","para_507","para_508","para_509","para_510"]},{"title":"Corp., 527 F. App'x 910, 918, 921–22 (Fed. Cir. 2013) (affirming","paragraphs":["para_512","para_513","para_514"]},{"title":"512 F.3d 412, 415 (7th Cir. 2008) (holding that the plaintiff","paragraphs":["para_516","para_517","para_518","para_519","para_520"]},{"title":"We conclude that TLS failed to establish that the","paragraphs":[]},{"title":"Strategy was a trade secret.9","paragraphs":[]},{"title":"9 The parties dispute whether a tax planning scheme can ever","paragraphs":["para_524","para_525","para_526"]},{"title":"III. The Breach of Contract Claims","paragraphs":["para_528"]},{"title":"TLS's second claim is that the defendants breached their","paragraphs":["para_530","para_531","para_532","para_533","para_534","para_535"]},{"title":"The defendants explicitly argued before the district court that","paragraphs":["para_537","para_538","para_539","para_540","para_541","para_542"]},{"title":"Here, the defendants argued that the nondisclosure agreements'","paragraphs":["para_544","para_545","para_546","para_547","para_548"]},{"title":"We need not reach this issue as to trade secrets because we","paragraphs":["para_550","para_551","para_552","para_553","para_554","para_555","para_556"]},{"title":"The district court's decision involved a purely legal","paragraphs":["para_558","para_559","para_560","para_561"]},{"title":"Agreement constituted a valid enforceable contract is a matter of","paragraphs":["para_563","para_564"]},{"title":"266 F.2d 535, 538-39 (9th Cir. 1959) (\"Where the pleadings and","paragraphs":["para_566","para_567","para_568","para_569"]},{"title":"On appeal, the defendants argue that the nondisclosure","paragraphs":["para_571","para_572","para_573"]},{"title":"As the parties agree, the enforceability of the","paragraphs":["para_575","para_576","para_577","para_578","para_579","para_580"]},{"title":"The court held that the validity of such a prohibition is to be","paragraphs":["para_582","para_583","para_584","para_585","para_586","para_587","para_588"]},{"title":"Ch. Div. 1982)). The court held that the noncompetition term","paragraphs":["para_590","para_591","para_592"]},{"title":"Rico's civil code statutes,10 other countries' civil laws, and","paragraphs":[]},{"title":"10 The court cited to Civil Code § 1207, which provides:","paragraphs":[]},{"title":"The contracting parties may make the agreement","paragraphs":["para_596","para_597","para_598","para_599"]},{"title":"P.R. Laws Ann. tit. 31, § 3372 (emphasis added), and Civil Code","paragraphs":["para_601"]},{"title":"Contracts are perfected by mere consent, and","paragraphs":["para_603","para_604","para_605","para_606","para_607"]},{"title":"TLS argues that a \"confidentiality clause\" is not a \"non-","paragraphs":["para_609","para_610","para_611","para_612","para_613","para_614","para_615"]},{"title":"S.E.2d 145, 149 (Ga. 1973) (\"Covenants not to disclose and utilize","paragraphs":["para_617","para_618","para_619","para_620","para_621","para_622"]},{"title":"In Arthur Young, the Puerto Rico Supreme Court held that","paragraphs":["para_624","para_625","para_626","para_627","para_628","para_629","para_630","para_631","para_632","para_633","para_634","para_635"]},{"title":"The Puerto Rico Supreme Court also cited with approval","paragraphs":["para_637","para_638","para_639","para_640","para_641","para_642"]},{"title":"369 (\"Covenants against disclosure, like covenants against","paragraphs":["para_644","para_645","para_646","para_647"]},{"title":"782 P.2d 1272, 1274–76 (Mont. 1989). A nondisclosure agreement is","paragraphs":["para_649","para_650","para_651","para_652","para_653"]},{"title":"Numerous courts have identified the types of agreements","paragraphs":["para_655","para_656","para_657","para_658"]},{"title":"It has been uniformly held that general","paragraphs":["para_660","para_661","para_662","para_663","para_664","para_665","para_666","para_667","para_668","para_669"]},{"title":"1984) (quoting Harlan M. Blake, Employment Agreements Not to","paragraphs":[]},{"title":"Compete, 73 Harv. L. Rev. 625, 652 (1960)); see also AMP, 823 F.2d","paragraphs":["para_672","para_673","para_674"]},{"title":"(\"The law is well settled that an employee upon terminating his","paragraphs":["para_676","para_677"]},{"title":"Second, a nondisclosure agreement is overly broad and","paragraphs":["para_679","para_680"]},{"title":"Nagler v. Garcia, 370 F. App'x 678, 681 (6th Cir. 2010) (quoting","paragraphs":[]},{"title":"Follmer, 362 N.W.2d at 683); AssuredPartners, Inc. v. Schmitt, 44","paragraphs":[]},{"title":"N.E.3d 463, 475–76 (Ill. Ct. App. 2015) (holding unenforceable a","paragraphs":["para_684","para_685","para_686","para_687"]},{"title":"Third, a nondisclosure agreement is overly broad when it","paragraphs":["para_689","para_690"]},{"title":"206, 209 (Ga. 1994) (nondisclosure agreement was valid because it","paragraphs":["para_692","para_693","para_694","para_695","para_696"]},{"title":"All of these factors exist here. The nondisclosure","paragraphs":["para_698","para_699"]},{"title":"1.2.1. All information[] . . . regarding","paragraphs":["para_701","para_702","para_703","para_704","para_705","para_706","para_707","para_708"]},{"title":"Affiliates;","paragraphs":[]},{"title":"1.2.2. . . . any other information provided to","paragraphs":["para_711","para_712","para_713","para_714","para_715","para_716","para_717","para_718","para_719","para_720","para_721","para_722"]},{"title":"1.2.4. . . . any other information that","paragraphs":["para_724","para_725"]},{"title":"The definition excluded:","paragraphs":[]},{"title":"1.3. . . . (a) information disclosed by one","paragraphs":[]},{"title":"Party with the prior written consent of the","paragraphs":["para_729","para_730","para_731","para_732","para_733"]},{"title":"The nondisclosure agreement's broad scope extended on","paragraphs":["para_735","para_736","para_737","para_738","para_739","para_740","para_741","para_742","para_743","para_744","para_745","para_746","para_747","para_748","para_749"]},{"title":"TLS admits, for example, that the nondisclosure agreement","paragraphs":["para_751","para_752","para_753","para_754","para_755"]},{"title":"The Rodríguez Agreement's astounding breadth and lack of","paragraphs":["para_757","para_758","para_759","para_760","para_761"]},{"title":"Young, 1994 WL 909262. Similar broad agreements have been","paragraphs":["para_763"]},{"title":"(nondisclosure agreement prohibiting former employee from","paragraphs":["para_765","para_766"]},{"title":"F.2d at 1202; (same); Nagler, 370 F. App'x at 681 (nondisclosure","paragraphs":["para_768","para_769"]},{"title":"Young and case law from the mainland U.S., we conclude that the","paragraphs":[]},{"title":"Puerto Rico Supreme Court would apply the principles articulated","paragraphs":["para_772","para_773","para_774"]},{"title":"The ASG Agreement contained language similar to that in","paragraphs":["para_776","para_777","para_778","para_779","para_780","para_781"]},{"title":"1766, 2015 WL 13547579, at *1 (D.P.R. July 8, 2015) (discussing","paragraphs":[]},{"title":"Puerto Rico cases, including Martin's BBQ v. Garcia De Gracia, 178","paragraphs":["para_784"]},{"title":"While there was no separate agreement between TLS and","paragraphs":[]},{"title":"GOS, the district court assumed that GOS was bound by the ASG and","paragraphs":[]},{"title":"Rodríguez Agreements.12 Thus, the invalidity of any nondisclosure","paragraphs":["para_788","para_789"]},{"title":"Here, we hold only that the nondisclosure provisions","paragraphs":["para_791","para_792","para_793","para_794"]},{"title":"Rodríguez. Thus, he was not bound by the nondisclosure provision","paragraphs":["para_796"]},{"title":"12 The district court appears to have concluded that GOS was","paragraphs":["para_798"]},{"title":"GOS. We need not determine whether GOS was bound because we hold","paragraphs":["para_800","para_801","para_802","para_803","para_804","para_805","para_806","para_807","para_808"]},{"title":"159 D.P.R. 523, 2003 WL 21212748, P.R. Offic. Trans. (P.R. 2003)","paragraphs":[]},{"title":"(holding that an overly broad noncompete agreement \"result[ed] in","paragraphs":["para_811","para_812","para_813","para_814","para_815"]},{"title":"Here, the defendants argue that the same rule applies to","paragraphs":["para_817","para_818","para_819"]},{"title":"13 We note that other mainland U.S. courts have reached the","paragraphs":["para_821","para_822","para_823","para_824"]},{"title":"Inc., 471 F.3d 272, 274–76 (1st Cir. 2006) (holding that the","paragraphs":["para_826","para_827","para_828","para_829","para_830","para_831","para_832"]},{"title":"The district court erred by granting TLS's summary","paragraphs":["para_834","para_835"]},{"title":"IV. Conclusion","paragraphs":[]},{"title":"We reverse the district court's decisions because TLS","paragraphs":["para_838","para_839","para_840","para_841"]}],"paragraphs":[{"text":"United States Court of Appeals","paragraph_id":"para_1"},{"text":"For the First Circuit","paragraph_id":"para_2"},{"text":"No. 19-1104","paragraph_id":"para_3"},{"text":"TLS MANAGEMENT AND MARKETING SERVICES, LLC,","paragraph_id":"para_4"},{"text":"Plaintiff, Appellee,","paragraph_id":"para_5"},{"text":"v.","paragraph_id":"para_6"},{"text":"RICKY RODRÍGUEZ-TOLEDO; ASG ACCOUNTING SOLUTIONS GROUP, INC.;","paragraph_id":"para_7"},{"text":"GLOBAL OUTSOURCING SERVICES, LLC,","paragraph_id":"para_8"},{"text":"Defendants, Appellants,","paragraph_id":"para_9"},{"text":"LORRAINE RAMOS; CONJUGAL PARTNERSHIP RODGRIGUEZ-RAMOS; MIGUEL A.","paragraph_id":"para_10"},{"text":"SANTO DOMINGO-ORTIZ; MARI LOURDES CARDONA-JIMENEZ, a/k/a Mari","paragraph_id":"para_11"},{"text":"Santo-Domingo; CONJUGAL PARTNERSHIP SANTO-DOMINGO-CARDONA;","paragraph_id":"para_12"},{"text":"SANDPIPER, LLC; DRRLC & ASSOCIATES, LLC; TRINITY PR, LLC; GLOBAL","paragraph_id":"para_13"},{"text":"TAX STRATEGY; INSURANCE COMPANY A; INSURANCE COMPANY B;","paragraph_id":"para_14"},{"text":"INSURANCE COMPANY C,","paragraph_id":"para_15"},{"text":"Defendants.","paragraph_id":"para_16"},{"text":"APPEAL FROM THE UNITED STATES DISTRICT COURT","paragraph_id":"para_17"},{"text":"FOR THE DISTRICT OF PUERTO RICO","paragraph_id":"para_18"},{"text":"[Hon. Bruce J. McGiverin, U.S. Magistrate Judge]","paragraph_id":"para_19"},{"text":"Before","paragraph_id":"para_20"},{"text":"Barron, Lipez, and Dyk,","paragraph_id":"para_21"},{"text":"Circuit Judges.","paragraph_id":"para_22"},{"text":"Lydia Margarita Ramos Cruz for appellants.","paragraph_id":"para_23"},{"text":"Manuel A. Pietrantoni, with whom Valerie M. Blay-Soler and","paragraph_id":"para_24"},{"text":"Marini Pietrantoni Muñiz LLC, were on brief, for appellee.","paragraph_id":"para_25"},{"text":" Of the Federal Circuit, sitting by designation.","paragraph_id":"para_26"},{"text":"- 2 -","paragraph_id":"para_27"},{"text":"July 21, 2020","paragraph_id":"para_28"},{"text":"- 3 -","paragraph_id":"para_29"},{"text":"DYK, Circuit Judge. TLS Management and Marketing","paragraph_id":"para_30"},{"text":"Services, LLC (\"TLS\"), sued Ricky Rodríguez-Toledo (\"Rodríguez\"),","paragraph_id":"para_31"},{"text":"ASG Accounting Solutions Group, Inc. (\"ASG\"), and Global","paragraph_id":"para_32"},{"text":"Outsourcing Services, LLC (\"GOS\") (collectively, \"defendants\") in","paragraph_id":"para_33"},{"text":"the United States District Court for the District of Puerto Rico,","paragraph_id":"para_34"},{"text":"alleging trade secret misappropriation (by Rodríguez and ASG) and","paragraph_id":"para_35"},{"text":"breach of nondisclosure agreements (by Rodríguez, ASG, and GOS).","paragraph_id":"para_36"},{"text":"The district court granted summary judgment to TLS on its breach","paragraph_id":"para_37"},{"text":"of contract claims, and after a non-jury trial, found that","paragraph_id":"para_38"},{"text":"Rodríguez and ASG were liable for misappropriation of trade","paragraph_id":"para_39"},{"text":"secrets.","paragraph_id":"para_40"},{"text":"We reverse because TLS failed to satisfy its burden to","paragraph_id":"para_41"},{"text":"prove the existence of trade secrets, and because the nondisclosure","paragraph_id":"para_42"},{"text":"agreements are so broad as to be unenforceable. We remand with","paragraph_id":"para_43"},{"text":"instructions to enter judgment in favor of the defendants.","paragraph_id":"para_44"},{"text":"I. Background","paragraph_id":"para_45"},{"text":"The facts are in large part undisputed. Plaintiff TLS","paragraph_id":"para_46"},{"text":"was a tax planning and consulting firm based in Puerto Rico. It","paragraph_id":"para_47"},{"text":"provided clients with advice to enable them to minimize United","paragraph_id":"para_48"},{"text":"States and Puerto Rico tax liabilities. TLS's business was divided","paragraph_id":"para_49"},{"text":"into a Consulting Division and Puerto Rico Division. TLS alleged","paragraph_id":"para_50"},{"text":"that it generated two trade secrets, the Capital Preservation","paragraph_id":"para_51"},{"text":"Report and the U.S. Possession Strategy.","paragraph_id":"para_52"},{"text":"The Consulting Division prepared a Capital Preservation","paragraph_id":"para_53"},{"text":"- 4 -","paragraph_id":"para_54"},{"text":"Report (\"CPR\") for clients providing tax recommendations specific","paragraph_id":"para_55"},{"text":"to each client based on an analysis of applicable statutes and","paragraph_id":"para_56"},{"text":"regulations. The trade secret was alleged to be the portion of","paragraph_id":"para_57"},{"text":"the CPR not specific to the individual client.","paragraph_id":"para_58"},{"text":"The Puerto Rico Division provided services utilizing the","paragraph_id":"para_59"},{"text":"so-called U.S. Possession Strategy (\"the Strategy\"), which","paragraph_id":"para_60"},{"text":"involved the provision of tax advice and tax avoidance services.","paragraph_id":"para_61"},{"text":"In essence, the Strategy was a \"tax arbitrage\" strategy based on","paragraph_id":"para_62"},{"text":"the fact that Puerto Rico tax rates were lower than U.S. federal","paragraph_id":"para_63"},{"text":"tax rates. Under the Strategy, a participating client, a business","paragraph_id":"para_64"},{"text":"owner in the mainland U.S., became a member of a TLS \"division,\"","paragraph_id":"para_65"},{"text":"and purchased shares of TLS, signing a \"buy-sell agreement\" that","paragraph_id":"para_66"},{"text":"limited the client's rights to transfer its membership shares.","paragraph_id":"para_67"},{"text":"Through a \"services agreement,\" the client's company on the","paragraph_id":"para_68"},{"text":"mainland outsourced some business activities (such as marketing)","paragraph_id":"para_69"},{"text":"to TLS. TLS and its affiliate had tax exemption grants under","paragraph_id":"para_70"},{"text":"Puerto Rico's Act 20 of 2012 (Export Services Act) and Act 73 of","paragraph_id":"para_71"},{"text":"2008 (Economic Incentives Act). A business that held a grant under","paragraph_id":"para_72"},{"text":"these Acts was generally subject to a fixed corporate tax rate of","paragraph_id":"para_73"},{"text":"4%, and dividend distributions to its stockholders were not subject","paragraph_id":"para_74"},{"text":"to a personal income tax if they were Puerto Rico residents. See","paragraph_id":"para_75"},{"text":"P.R. Laws Ann. tit. 13, §§ 10643, 10832, 10834.","paragraph_id":"para_76"},{"text":"Under the Acts, it appears that TLS paid a 4% Puerto","paragraph_id":"para_77"},{"text":"Rico tax rate on the outsourcing fees paid to TLS while the same","paragraph_id":"para_78"},{"text":"- 5 -","paragraph_id":"para_79"},{"text":"fees were deductible to the mainland client's company as a business","paragraph_id":"para_80"},{"text":"expense and thus not subject to federal or state taxation. If TLS","paragraph_id":"para_81"},{"text":"distributed the earnings to the client as a dividend after the","paragraph_id":"para_82"},{"text":"client became a Puerto Rico resident, the dividend would be exempt","paragraph_id":"para_83"},{"text":"from taxation under the Acts. If the client wished to access the","paragraph_id":"para_84"},{"text":"earnings (dividends) before moving to Puerto Rico, the client and","paragraph_id":"para_85"},{"text":"TLS entered into a \"promissory note\" and \"security agreement,\"","paragraph_id":"para_86"},{"text":"effectively allowing the client to withdraw the earnings as a tax-","paragraph_id":"para_87"},{"text":"free loan. Thus, the effect of the Strategy was that the","paragraph_id":"para_88"},{"text":"activities of the client's company in the mainland U.S. would","paragraph_id":"para_89"},{"text":"effectively be subject only to a 4% rate on the outsourced services","paragraph_id":"para_90"},{"text":"instead of a higher U.S. corporate tax rate on the income from the","paragraph_id":"para_91"},{"text":"outsourced services, and that distributions to the client would","paragraph_id":"para_92"},{"text":"not be taxed. But a premature termination of the client's","paragraph_id":"para_93"},{"text":"\"membership\" with TLS could result in adverse tax consequences","paragraph_id":"para_94"},{"text":"because distributions would not be exempt from tax.","paragraph_id":"para_95"},{"text":"Defendant Rodríguez was the founder of defendant ASG, a","paragraph_id":"para_96"},{"text":"company that also offered services in tax planning and accounting.","paragraph_id":"para_97"},{"text":"In March 2012, ASG signed a Subcontractor Agreement (\"the ASG","paragraph_id":"para_98"},{"text":"Agreement\") with TLS that included a nondisclosure provision. On","paragraph_id":"para_99"},{"text":"September 1, 2012, Rodríguez began working for TLS as its Managing","paragraph_id":"para_100"},{"text":"Director and signed a Confidentiality and Non-Disclosure Agreement","paragraph_id":"para_101"},{"text":"(\"the Rodríguez Agreement\"). The ASG and Rodríguez Agreements","paragraph_id":"para_102"},{"text":"contained similar nondisclosure provisions governed by Puerto Rico","paragraph_id":"para_103"},{"text":"- 6 -","paragraph_id":"para_104"},{"text":"law.1 Rodríguez and ASG's relationship with TLS appears to have","paragraph_id":"para_105"},{"text":"concluded in early 2015.","paragraph_id":"para_106"},{"text":"After his departure from TLS, Rodríguez provided tax","paragraph_id":"para_107"},{"text":"services in competition with TLS through ASG and GOS (another","paragraph_id":"para_108"},{"text":"company in which Rodríguez purchased a majority interest after he","paragraph_id":"para_109"},{"text":"left TLS). Rodríguez was the majority owner of both companies.","paragraph_id":"para_110"},{"text":"TLS alleged that Rodríguez and ASG misappropriated trade secrets","paragraph_id":"para_111"},{"text":"by utilizing the Strategy trade secret in providing tax services","paragraph_id":"para_112"},{"text":"to two former clients of TLS. These clients sought advice on how","paragraph_id":"para_113"},{"text":"to exit their \"membership\" with TLS. The clients emailed documents","paragraph_id":"para_114"},{"text":"(which they received from TLS) to Rodríguez who then provided","paragraph_id":"para_115"},{"text":"comments. To minimize the tax impact of exiting the membership","paragraph_id":"para_116"},{"text":"with TLS, Rodríguez suggested transferring the interest in the TLS","paragraph_id":"para_117"},{"text":"division to a new Puerto Rico trust or limited liability company","paragraph_id":"para_118"},{"text":"(\"LLC\") in order to delay tax liability until the clients became","paragraph_id":"para_119"},{"text":"Puerto Rico residents. ASG proceeded to create LLCs for the","paragraph_id":"para_120"},{"text":"clients.","paragraph_id":"para_121"},{"text":"On August 17, 2015, TLS sued Rodríguez, ASG, and GOS in","paragraph_id":"para_122"},{"text":"the United States District Court for the District of Puerto Rico.2","paragraph_id":"para_123"},{"text":"1 The contracts are governed by \"the laws of the jurisdiction","paragraph_id":"para_124"},{"text":"in which TLS [wa]s domiciled.\"","paragraph_id":"para_125"},{"text":"2 TLS also joined numerous other defendants that were later","paragraph_id":"para_126"},{"text":"dismissed. TLS also asserted various other claims based on federal","paragraph_id":"para_127"},{"text":"law that were abandoned or rejected by the district court. Those","paragraph_id":"para_128"},{"text":"claims are not the subject of this appeal. The district court had","paragraph_id":"para_129"},{"text":"federal question jurisdiction over the federal claims and","paragraph_id":"para_130"},{"text":"- 7 -","paragraph_id":"para_131"},{"text":"TLS alleged that (1) Rodríguez and ASG misappropriated TLS's trade","paragraph_id":"para_132"},{"text":"secrets under P.R. Laws Ann. tit. 10, §§ 4131–41, and","paragraph_id":"para_133"},{"text":"(2) Rodríguez, ASG, and GOS breached their nondisclosure","paragraph_id":"para_134"},{"text":"agreements.","paragraph_id":"para_135"},{"text":"Rodríguez was alleged to have misappropriated the CPR","paragraph_id":"para_136"},{"text":"trade secret by downloading copies of particular CPRs without","paragraph_id":"para_137"},{"text":"authorization from TLS's Dropbox account before he left TLS.","paragraph_id":"para_138"},{"text":"Rodríguez and ASG were alleged also to have violated the","paragraph_id":"para_139"},{"text":"nondisclosure agreements by providing services to the two former","paragraph_id":"para_140"},{"text":"clients of TLS and other TLS clients using information protected","paragraph_id":"para_141"},{"text":"by the nondisclosure agreements. GOS was alleged to have violated","paragraph_id":"para_142"},{"text":"those agreements by using TLS's \"loan application\" form for its","paragraph_id":"para_143"},{"text":"business.","paragraph_id":"para_144"},{"text":"TLS and the defendants filed cross-motions for summary","paragraph_id":"para_145"},{"text":"judgment. The district court granted summary judgment to TLS on","paragraph_id":"para_146"},{"text":"the breach of contract claims. With respect to these claims, the","paragraph_id":"para_147"},{"text":"defendants' primary defense was that they were not liable because","paragraph_id":"para_148"},{"text":"the nondisclosure agreements were unenforceable. The district","paragraph_id":"para_149"},{"text":"court held that this argument was waived and did not address the","paragraph_id":"para_150"},{"text":"argument on the merits. It then concluded that ASG and Rodríguez","paragraph_id":"para_151"},{"text":"were liable for \"disclosure of the U.S. Possession Strategy and","paragraph_id":"para_152"},{"text":"retention of TLS's Confidential Information.\" Later, in its non-","paragraph_id":"para_153"},{"text":"supplemental jurisdiction over the state-law claims.","paragraph_id":"para_154"},{"text":"- 8 -","paragraph_id":"para_155"},{"text":"jury trial opinion, the district court characterized its order","paragraph_id":"para_156"},{"text":"granting summary judgment as finding \"liability on the part of","paragraph_id":"para_157"},{"text":"Rodríguez and ASG for breaching the confidentiality clauses by","paragraph_id":"para_158"},{"text":"using TLS's loan agreement and operating agreement, for using and","paragraph_id":"para_159"},{"text":"disclosing the Strategy to clients, and for keeping files after","paragraph_id":"para_160"},{"text":"employment with TLS ended.\"","paragraph_id":"para_161"},{"text":"The district court held a non-jury trial on the trade","paragraph_id":"para_162"},{"text":"secret claims. TLS presented only two witnesses, Richard Colombik","paragraph_id":"para_163"},{"text":"and David Runge, who were principals of TLS. The defendants","paragraph_id":"para_164"},{"text":"presented only Rodríguez as a witness. The district court held","paragraph_id":"para_165"},{"text":"that TLS's CPR and the Strategy were trade secrets. It then","paragraph_id":"para_166"},{"text":"concluded that Rodríguez and ASG misappropriated the Strategy","paragraph_id":"para_167"},{"text":"trade secret when Rodríguez and ASG gave advice to two former TLS","paragraph_id":"para_168"},{"text":"clients to help them structure their exit from TLS's membership,","paragraph_id":"para_169"},{"text":"and that Rodríguez misappropriated the CPR trade secret by","paragraph_id":"para_170"},{"text":"downloading two CPRs from TLS's Dropbox account without","paragraph_id":"para_171"},{"text":"authorization.3","paragraph_id":"para_172"},{"text":"The district court awarded damages for TLS's trade","paragraph_id":"para_173"},{"text":"secret claims by trebling the service fees paid by the former","paragraph_id":"para_174"},{"text":"clients to ASG. It declined to award damages for breaching the","paragraph_id":"para_175"},{"text":"nondisclosure agreements, reasoning that an award would be","paragraph_id":"para_176"},{"text":"3 The district court stated that Rodríguez \"conceded that he","paragraph_id":"para_177"},{"text":"acted without authority when he copied\" contents in the Dropbox","paragraph_id":"para_178"},{"text":"account and that \"he did not have authority to refer to TLS","paragraph_id":"para_179"},{"text":"information in the[] emails\" to these clients.","paragraph_id":"para_180"},{"text":"- 9 -","paragraph_id":"para_181"},{"text":"duplicative of the damages under the trade secrets claims.","paragraph_id":"para_182"},{"text":"However, the district court issued a permanent injunction order","paragraph_id":"para_183"},{"text":"enjoining the defendants \"from using or disclosing any of TLS's","paragraph_id":"para_184"},{"text":"'confidential information' or its trade secrets in violation of,","paragraph_id":"para_185"},{"text":"as defined by, the [ASG and Rodríguez Agreements].\"","paragraph_id":"para_186"},{"text":"The defendants appeal, arguing that the district court","paragraph_id":"para_187"},{"text":"erred in granting summary judgment to TLS as to the breach of","paragraph_id":"para_188"},{"text":"contract claims and in denying the defendants' motion for summary","paragraph_id":"para_189"},{"text":"judgment, and in holding that TLS proved its trade secret claims","paragraph_id":"para_190"},{"text":"at trial.","paragraph_id":"para_191"},{"text":"We have jurisdiction under 28 U.S.C. § 1291. \"We review","paragraph_id":"para_192"},{"text":"de novo both the entry of summary judgment . . . and the","paragraph_id":"para_193"},{"text":"interpretation of the parties' contract[s].\" Farthing v. Coco","paragraph_id":"para_194"},{"text":"Beach Resort Mgmt., LLC, 864 F.3d 39, 43 (1st Cir. 2017). As for","paragraph_id":"para_195"},{"text":"the trade secret claims that were adjudicated by a non-jury trial,","paragraph_id":"para_196"},{"text":"we review the district court's legal determination de novo, United","paragraph_id":"para_197"},{"text":"States v. 15 Bosworth St., 236 F.3d 50, 53 (1st Cir. 2001), and","paragraph_id":"para_198"},{"text":"its factual findings for clear error, Doe v. Harvard Pilgrim Health","paragraph_id":"para_199"},{"text":"Care, Inc., 904 F.3d 1, 10 (1st Cir. 2018). We may decide","paragraph_id":"para_200"},{"text":"sufficiency of the evidence on our own, even though the district","paragraph_id":"para_201"},{"text":"court did not have occasion to do so, when the evidence admits of","paragraph_id":"para_202"},{"text":"only one outcome under the correct legal standard. See, e.g.,","paragraph_id":"para_203"},{"text":"Donovan v. A. Amorello & Sons, Inc., 761 F.2d 61, 66 (1st Cir.","paragraph_id":"para_204"},{"text":"1985) (\"[W]here findings are infirm because of an erroneous view","paragraph_id":"para_205"},{"text":"- 10 -","paragraph_id":"para_206"},{"text":"of the law, a remand is the proper course unless the record permits","paragraph_id":"para_207"},{"text":"only one resolution of the factual issue.\" (alteration in original)","paragraph_id":"para_208"},{"text":"(quoting Pullman–Standard v. Swint, 456 U.S. 273, 292 (1982)));","paragraph_id":"para_209"},{"text":"see also Wright v. Lassiter, 921 F.3d 413, 418–19 (4th Cir.), cert.","paragraph_id":"para_210"},{"text":"denied, 140 S. Ct. 165 (2019) (\"While we usually remand when the","paragraph_id":"para_211"},{"text":"district court has misapplied the relevant legal standard after a","paragraph_id":"para_212"},{"text":"bench trial, we may affirm when the evidence permits only one","paragraph_id":"para_213"},{"text":"conclusion.\").","paragraph_id":"para_214"},{"text":"II. The Trade Secret Claims","paragraph_id":"para_215"},{"text":"We first address TLS's trade secret claims under Puerto","paragraph_id":"para_216"},{"text":"Rico law. The defendants argue that TLS failed to establish that","paragraph_id":"para_217"},{"text":"it had trade secrets.","paragraph_id":"para_218"},{"text":"Most forms of intellectual property have boundaries that","paragraph_id":"para_219"},{"text":"are defined before the commencement of litigation. In the case of","paragraph_id":"para_220"},{"text":"patents the claims define the scope of the patent right, see, e.g.,","paragraph_id":"para_221"},{"text":"Markman v. Westview Instruments, Inc., 517 U.S. 370, 372–73 (1996),","paragraph_id":"para_222"},{"text":"in the case of copyright the federal registration defines the scope","paragraph_id":"para_223"},{"text":"of the copyrighted material that can be enforced, Fourth Estate","paragraph_id":"para_224"},{"text":"Pub. Benefit Corp. v. Wall-Street.com, LLC, 139 S. Ct. 881, 887","paragraph_id":"para_225"},{"text":"(2019), and in the case of trademark the federal registration and","paragraph_id":"para_226"},{"text":"the public use of the mark define the boundaries, see, e.g.,","paragraph_id":"para_227"},{"text":"Converse, Inc. v. Int'l Trade Comm'n Skechers U.S.A., Inc., 909","paragraph_id":"para_228"},{"text":"F.3d 1110, 1115–16 (Fed. Cir. 2018). To be sure, there may be and","paragraph_id":"para_229"},{"text":"often are disputes as to scope, but the outer bounds are defined","paragraph_id":"para_230"},{"text":"- 11 -","paragraph_id":"para_231"},{"text":"in advance so that competitors can tailor their conduct","paragraph_id":"para_232"},{"text":"accordingly. Trade secrets are different. There is no requirement","paragraph_id":"para_233"},{"text":"of registration and, by definition, there is no public knowledge","paragraph_id":"para_234"},{"text":"of the trade secret in advance of litigation. Even the defendant","paragraph_id":"para_235"},{"text":"is not necessarily on notice of the trade secret before litigation.","paragraph_id":"para_236"},{"text":"This raises the possibility that the trade secret owner will tailor","paragraph_id":"para_237"},{"text":"the scope of the trade secret in litigation to conform to the","paragraph_id":"para_238"},{"text":"litigation strategy. The present case illustrates these risks;","paragraph_id":"para_239"},{"text":"the alleged trade secrets were not identified by TLS until the eve","paragraph_id":"para_240"},{"text":"of trial.","paragraph_id":"para_241"},{"text":"Because of the potentially amorphous nature of trade","paragraph_id":"para_242"},{"text":"secrets, Puerto Rico's Industrial and Trade Secret Protection Act","paragraph_id":"para_243"},{"text":"(\"Trade Secret Act\") requires that \"[i]n any action filed whereby","paragraph_id":"para_244"},{"text":"misappropriation of an industrial or trade secret is alleged under","paragraph_id":"para_245"},{"text":"this chapter, the plaintiff, before discovery of proof, shall","paragraph_id":"para_246"},{"text":"describe the trade secret as specifically as possible, but without","paragraph_id":"para_247"},{"text":"disclosing the same.\" P.R. Laws Ann. tit. 10, § 4139(a).4 In","paragraph_id":"para_248"},{"text":"addition, the trade secret owner has the burden of proof to","paragraph_id":"para_249"},{"text":"establish the existence and scope of the alleged trade secret in","paragraph_id":"para_250"},{"text":"4 On appeal, the defendants argue that TLS's trade secret","paragraph_id":"para_251"},{"text":"claims are barred because it failed to timely","paragraph_id":"para_252"},{"text":"satisfy section 4139(a)'s requirement that the plaintiff describe","paragraph_id":"para_253"},{"text":"the trade secret as specifically as possible before discovery","paragraph_id":"para_254"},{"text":"begins. In light of our holding that TLS failed to prove its trade","paragraph_id":"para_255"},{"text":"secret claims, we need not address the section 4139(a)","paragraph_id":"para_256"},{"text":"requirement.","paragraph_id":"para_257"},{"text":"- 12 -","paragraph_id":"para_258"},{"text":"the litigation. See, e.g., IDX Sys. Corp. v. Epic Sys. Corp., 285","paragraph_id":"para_259"},{"text":"F.3d 581, 583 (7th Cir. 2002); Composite Marine Propellers, Inc.","paragraph_id":"para_260"},{"text":"v. Van Der Woude, 962 F.2d 1263, 1266 (7th Cir. 1992).","paragraph_id":"para_261"},{"text":"Puerto Rico's Trade Secret Act defines \"trade secrets\"","paragraph_id":"para_262"},{"text":"to be any information:","paragraph_id":"para_263"},{"text":"(a) That has a present or a potential","paragraph_id":"para_264"},{"text":"independent financial value or that provides","paragraph_id":"para_265"},{"text":"a business advantage, insofar as such","paragraph_id":"para_266"},{"text":"information is not common knowledge or readily","paragraph_id":"para_267"},{"text":"accessible through proper means by persons who","paragraph_id":"para_268"},{"text":"could make a monetary profit from the use or","paragraph_id":"para_269"},{"text":"disclosure of such information, and","paragraph_id":"para_270"},{"text":"(b) for which reasonable security measures","paragraph_id":"para_271"},{"text":"have been taken, as circumstances dictate, to","paragraph_id":"para_272"},{"text":"maintain its confidentiality.","paragraph_id":"para_273"},{"text":"P.R. Laws Ann. tit. 10, § 4132. This is similar to the definition","paragraph_id":"para_274"},{"text":"in the Uniform Trade Secrets Act (\"UTSA\") on which the Trade Secret","paragraph_id":"para_275"},{"text":"Act is based.5 The statutory definition requires proof that the","paragraph_id":"para_276"},{"text":"alleged trade secret (1) was distinct from general knowledge; (2)","paragraph_id":"para_277"},{"text":"was not readily ascertainable; (3) had independent value; and (4)","paragraph_id":"para_278"},{"text":"was subject to reasonable security measures.","paragraph_id":"para_279"},{"text":"The Puerto Rico Supreme Court has not further","paragraph_id":"para_280"},{"text":"illuminated the elements for proving trade secret","paragraph_id":"para_281"},{"text":"5 The UTSA defines \"trade secret\" to mean information that","paragraph_id":"para_282"},{"text":"\"(i) derives independent economic value, actual or potential, from","paragraph_id":"para_283"},{"text":"not being generally known to, and not being readily ascertainable","paragraph_id":"para_284"},{"text":"by proper means by, other persons who can obtain economic value","paragraph_id":"para_285"},{"text":"from its disclosure or use, and (ii) is the subject of efforts","paragraph_id":"para_286"},{"text":"that are reasonable under the circumstances to maintain its","paragraph_id":"para_287"},{"text":"secrecy.\" Unif. Trade Secrets Act § 1(4) (amended 1985).","paragraph_id":"para_288"},{"text":"- 13 -","paragraph_id":"para_289"},{"text":"misappropriation. However, the Puerto Rico Supreme Court","paragraph_id":"para_290"},{"text":"generally looks at the law of other jurisdictions that have adopted","paragraph_id":"para_291"},{"text":"a uniform act when interpreting Commonwealth law that was modeled","paragraph_id":"para_292"},{"text":"after the same uniform act. See, e.g., St. Paul Fire & Marine v.","paragraph_id":"para_293"},{"text":"Caguas Fed. Savs., 121 D.P.R. 761, 21 P.R. Offic. Trans. 743, 749,","paragraph_id":"para_294"},{"text":"1988 WL 580787 (P.R. 1988). TLS admits that \"[t]he Supreme Court","paragraph_id":"para_295"},{"text":"of Puerto Rico does regularly look to other jurisdictions and how","paragraph_id":"para_296"},{"text":"they've interpreted other statutes that are similar . . . to the","paragraph_id":"para_297"},{"text":"particular statute in Puerto Rico [that] the Supreme Court is","paragraph_id":"para_298"},{"text":"interpreting.\" We thus consider court cases from other","paragraph_id":"para_299"},{"text":"jurisdictions that have adopted the UTSA in determining whether","paragraph_id":"para_300"},{"text":"TLS proved its trade secret claims.6 See In re Montreal, Maine &","paragraph_id":"para_301"},{"text":"Atl. Ry., Ltd., 799 F.3d 1, 10 (1st Cir. 2015) (holding that on an","paragraph_id":"para_302"},{"text":"undecided state-law issue federal courts predict \"the course that","paragraph_id":"para_303"},{"text":"a state court likely would follow\" by \"begin[ning] with settled","paragraph_id":"para_304"},{"text":"principles of state law and then consider[ing] persuasive","paragraph_id":"para_305"},{"text":"authority from other jurisdictions and the teachings of learned","paragraph_id":"para_306"},{"text":"treatises\").","paragraph_id":"para_307"},{"text":"A. The Alleged CPR Trade Secret","paragraph_id":"para_308"},{"text":"As to the alleged CPR trade secret, the question is","paragraph_id":"para_309"},{"text":"whether TLS established that the two CPRs that Rodríguez downloaded","paragraph_id":"para_310"},{"text":"6 The UTSA has been adopted by almost all states in the","paragraph_id":"para_311"},{"text":"mainland U.S., the District of Columbia, Puerto Rico, and the U.S.","paragraph_id":"para_312"},{"text":"Virgin Islands. See 1 Roger M. Milgrim, Milgrim on Trade Secrets","paragraph_id":"para_313"},{"text":"§ 1.01 (2020).","paragraph_id":"para_314"},{"text":"- 14 -","paragraph_id":"para_315"},{"text":"satisfied the statutory definition of a trade secret. The district","paragraph_id":"para_316"},{"text":"court held that TLS's \"CPR itself qualifie[d] as a trade secret","paragraph_id":"para_317"},{"text":". . . because the compilation of [TLS employees'] knowledge and","paragraph_id":"para_318"},{"text":"skill, applied to client information, provide[d] TLS with a","paragraph_id":"para_319"},{"text":"competitive advantage.\" However, the district court did not apply","paragraph_id":"para_320"},{"text":"the appropriate trade secret definition, and we conclude that,","paragraph_id":"para_321"},{"text":"using the correct standard, as a matter of law TLS did not","paragraph_id":"para_322"},{"text":"establish that the two CPRs constituted trade secrets.","paragraph_id":"para_323"},{"text":"A CPR is a report that TLS customized for the particular","paragraph_id":"para_324"},{"text":"client. It appears that the typical CPR is over a hundred pages","paragraph_id":"para_325"},{"text":"in length. It describes public and general information such as","paragraph_id":"para_326"},{"text":"the meaning of tax terms, the concept of corporate structures","paragraph_id":"para_327"},{"text":"(e.g., comparison between S- and C- corporations), case law, IRS","paragraph_id":"para_328"},{"text":"regulations and tax statutes, state tax laws, Puerto Rico tax laws,","paragraph_id":"para_329"},{"text":"generic taxation examples, and public trade articles. A CPR also","paragraph_id":"para_330"},{"text":"contains individual client information. The district court","paragraph_id":"para_331"},{"text":"correctly stated that \"individual client information and public","paragraph_id":"para_332"},{"text":"information contained in the CPR [we]re not trade secrets,\" and","paragraph_id":"para_333"},{"text":"TLS does not contend otherwise. TLS was required to establish","paragraph_id":"para_334"},{"text":"that the CPRs contained information that was not public or client","paragraph_id":"para_335"},{"text":"information.","paragraph_id":"para_336"},{"text":"The Restatement (Third) of Unfair Competition (Am. Law","paragraph_id":"para_337"},{"text":"Inst. 1995) states the general requirement that \"[a] person","paragraph_id":"para_338"},{"text":"claiming rights in a trade secret bears the burden of defining the","paragraph_id":"para_339"},{"text":"- 15 -","paragraph_id":"para_340"},{"text":"information for which protection is sought with sufficient","paragraph_id":"para_341"},{"text":"definiteness to permit a court to apply the criteria for","paragraph_id":"para_342"},{"text":"protection . . . and to determine the fact of an appropriation.\"","paragraph_id":"para_343"},{"text":"Id. § 39 cmt. d; see also id. at cmt. f, reporters' notes at 443.","paragraph_id":"para_344"},{"text":"Courts interpreting the UTSA have uniformly followed this","paragraph_id":"para_345"},{"text":"requirement. See, e.g., IDX, 285 F.3d at 583 (Wisconsin law);","paragraph_id":"para_346"},{"text":"Composite Marine, 962 F.2d at 1266 (Illinois law); Wal-Mart Stores,","paragraph_id":"para_347"},{"text":"Inc. v. P.O. Mkt., Inc., 66 S.W.3d 620, 631–32 (Ark. 2002)","paragraph_id":"para_348"},{"text":"(collecting cases).","paragraph_id":"para_349"},{"text":"During oral argument, TLS was repeatedly asked what the","paragraph_id":"para_350"},{"text":"trade secrets were in the CPRs. It could not articulate what","paragraph_id":"para_351"},{"text":"aspects of the CPRs qualified as a trade secret but instead","paragraph_id":"para_352"},{"text":"generally referred this court to the record. We have carefully","paragraph_id":"para_353"},{"text":"examined the record, and find no evidence that could support a","paragraph_id":"para_354"},{"text":"holding that TLS established the existence of a trade secret in","paragraph_id":"para_355"},{"text":"the CPRs. TLS's principal, Mr. Colombik, testified that TLS had","paragraph_id":"para_356"},{"text":"\"approximately 53 different methods or techniques\" that it could","paragraph_id":"para_357"},{"text":"select for a particular client, but he did not describe what they","paragraph_id":"para_358"},{"text":"were. Mr. Colombik referenced only several at a high level--that","paragraph_id":"para_359"},{"text":"TLS would conduct a \"salary analysis,\" consider \"fringe benefits,\"","paragraph_id":"para_360"},{"text":"look at the client's \"retirement plan,\" and use \"captive insurance","paragraph_id":"para_361"},{"text":"company\" techniques, or decide \"whether or not [the client] can","paragraph_id":"para_362"},{"text":"get a race car and modify how they use it to write it off as","paragraph_id":"para_363"},{"text":"advertising,\" and that its recommendations would result in tax","paragraph_id":"para_364"},{"text":"- 16 -","paragraph_id":"para_365"},{"text":"savings. Such general description was insufficient to establish","paragraph_id":"para_366"},{"text":"a trade secret.","paragraph_id":"para_367"},{"text":"In short, any trade secrets in the CPR were not","paragraph_id":"para_368"},{"text":"identifiable because TLS did not \"separate the [purported] trade","paragraph_id":"para_369"},{"text":"secrets from the other information . . . [that was] known to the","paragraph_id":"para_370"},{"text":"trade.\" IDX, 285 F.3d at 584 (holding that the plaintiff failed","paragraph_id":"para_371"},{"text":"to identify trade secrets with specificity because it failed to","paragraph_id":"para_372"},{"text":"distinguish what aspects in a 43-page description were known to","paragraph_id":"para_373"},{"text":"the trade); SL Montevideo Tech., Inc. v. Eaton Aerospace, LLC, 491","paragraph_id":"para_374"},{"text":"F.3d 350, 354 (8th Cir. 2007) (\"[S]imply to assert [that] a trade","paragraph_id":"para_375"},{"text":"secret resides in some combination of otherwise known data is not","paragraph_id":"para_376"},{"text":"sufficient [to prove a claim], as the combination itself must be","paragraph_id":"para_377"},{"text":"delineated with some particularity in establishing its trade","paragraph_id":"para_378"},{"text":"secret status.\" (quoting Jostens, Inc. v. Nat'l Comput., 318 N.W.2d","paragraph_id":"para_379"},{"text":"691, 699 (Minn. 1982))). \"[A] plaintiff must do more than just","paragraph_id":"para_380"},{"text":"identify a kind of technology and then invite the court to hunt","paragraph_id":"para_381"},{"text":"through the details in search of items meeting the statutory","paragraph_id":"para_382"},{"text":"definition [of a trade secret].\" IDX, 285 F.3d at 584.7","paragraph_id":"para_383"},{"text":"7 See also Am. Can Co. v. Mansukhani, 742 F.2d 314, 331 & n.21","paragraph_id":"para_384"},{"text":"(7th Cir. 1984) (holding that a party cannot prevent others from","paragraph_id":"para_385"},{"text":"using public information and general knowledge); Trandes Corp. v.","paragraph_id":"para_386"},{"text":"Guy F. Atkinson Co., 996 F.2d 655, 661–62 (4th Cir. 1993) (holding","paragraph_id":"para_387"},{"text":"that the plaintiff's allegations were insufficient to show it had","paragraph_id":"para_388"},{"text":"trade secrets because no reasonable jury could differentiate them","paragraph_id":"para_389"},{"text":"from \"matters of general knowledge in the trade\" (quoting Diodes,","paragraph_id":"para_390"},{"text":"Inc. v. Franzen, 260 Cal. App. 2d 244, 253 (Ct. App. 1968)); MAI","paragraph_id":"para_391"},{"text":"Sys. Corp. v. Peak Comput., Inc., 991 F.2d 511, 522 (9th Cir.","paragraph_id":"para_392"},{"text":"- 17 -","paragraph_id":"para_393"},{"text":"It appears that TLS also claims that the process itself","paragraph_id":"para_394"},{"text":"to create the CPR was a trade secret. However, TLS also failed to","paragraph_id":"para_395"},{"text":"identify what process constituted a trade secret. Because TLS","paragraph_id":"para_396"},{"text":"failed to identify the process with specificity, let alone","paragraph_id":"para_397"},{"text":"establish what aspects were not readily ascertainable, no","paragraph_id":"para_398"},{"text":"reasonable fact finder could determine that TLS proved its claim","paragraph_id":"para_399"},{"text":"by merely asserting that the process for compiling the CPR's","paragraph_id":"para_400"},{"text":"content (which generally comprised public information) qualified","paragraph_id":"para_401"},{"text":"as a trade secret.","paragraph_id":"para_402"},{"text":"Here, TLS made no showing as to what aspects of the CPRs","paragraph_id":"para_403"},{"text":"were public knowledge and which were not. We conclude as a matter","paragraph_id":"para_404"},{"text":"of law that TLS did not establish that the CPRs contained a trade","paragraph_id":"para_405"},{"text":"secret.","paragraph_id":"para_406"},{"text":"B. The Alleged Strategy Trade Secret","paragraph_id":"para_407"},{"text":"We turn to the question whether the Strategy, described","paragraph_id":"para_408"},{"text":"above, was a trade secret. The district court held that the","paragraph_id":"para_409"},{"text":"1993); Composite Marine, 962 F.2d at 1266; Luigino's, Inc. v.","paragraph_id":"para_410"},{"text":"Peterson, 317 F.3d 909, 912 (8th Cir. 2003); Givaudan Fragrances","paragraph_id":"para_411"},{"text":"Corp. v. Krivda, 639 F. App'x 840, 845 (3d Cir. 2016); Mass. Eye","paragraph_id":"para_412"},{"text":"& Ear Infirmary v. QLT Phototherapeutics, Inc., 552 F.3d 47, 61","paragraph_id":"para_413"},{"text":"(1st Cir. 2009), decision clarified on denial of reh'g, 559 F.3d","paragraph_id":"para_414"},{"text":"1 (1st Cir. 2009); AMP, Inc. v. Fleischhacker, 823 F.2d 1199, 1203","paragraph_id":"para_415"},{"text":"(7th Cir. 1987); Litton Sys., Inc. v. Sundstrand Corp., 750 F.2d","paragraph_id":"para_416"},{"text":"952, 960–61 (Fed. Cir. 1984); Quantum Sail Design Grp., LLC v.","paragraph_id":"para_417"},{"text":"Jannie Reuvers Sails, Ltd., No. 1:13-CV-879, 2015 WL 404393, at *4","paragraph_id":"para_418"},{"text":"(W.D. Mich. Jan. 29, 2015) (\"A party alleging trade secret","paragraph_id":"para_419"},{"text":"misappropriation must particularize and identify the purported","paragraph_id":"para_420"},{"text":"misappropriated trade secrets with specificity.\" (quoting Dura","paragraph_id":"para_421"},{"text":"Global Techs., Inc. v. Magna Donnelly Corp., 662 F. Supp. 2d 855,","paragraph_id":"para_422"},{"text":"859 (E.D. Mich. 2009))).","paragraph_id":"para_423"},{"text":"- 18 -","paragraph_id":"para_424"},{"text":"Strategy was a trade secret because \"it [wa]s a process and method","paragraph_id":"para_425"},{"text":"building on the knowledge and experience of employees that [wa]s","paragraph_id":"para_426"},{"text":"used to give TLS a business advantage.\" Again, we conclude that","paragraph_id":"para_427"},{"text":"the district court applied an incorrect definition and that, under","paragraph_id":"para_428"},{"text":"the correct definition, TLS failed to show that the Strategy was","paragraph_id":"para_429"},{"text":"a trade secret.","paragraph_id":"para_430"},{"text":"To a large extent, the Strategy, like the CPRs, consisted","paragraph_id":"para_431"},{"text":"of public knowledge. The general concept of \"tax arbitrage\" based","paragraph_id":"para_432"},{"text":"on Puerto Rico tax exemption laws was hardly secret. TLS's own","paragraph_id":"para_433"},{"text":"CPR stated that it \"[wa]s well established in the Internal Revenue","paragraph_id":"para_434"},{"text":"Code and case law\" that the combination of the federal and Puerto","paragraph_id":"para_435"},{"text":"Rico tax laws allowed \"a business [to] reduce or eliminate","paragraph_id":"para_436"},{"text":"potential double taxation.\"","paragraph_id":"para_437"},{"text":"Despite generalized testimony by Mr. Runge that \"all","paragraph_id":"para_438"},{"text":". . . methods and procedures and processes [of the Strategy] didn't","paragraph_id":"para_439"},{"text":"exist before [TLS] designed them,\" it is undisputed that most of","paragraph_id":"para_440"},{"text":"the individual steps implemented in the Strategy--e.g., a Puerto","paragraph_id":"para_441"},{"text":"Rico company obtaining a tax exemption grant, a mainland company","paragraph_id":"para_442"},{"text":"outsourcing business activities to Puerto Rico, and a Puerto Rico","paragraph_id":"para_443"},{"text":"company issuing shares--were well known.","paragraph_id":"para_444"},{"text":"TLS's principals, Mr. Runge and Mr. Colombik, testified","paragraph_id":"para_445"},{"text":"that these components of the Strategy were \"standard\" and \"common.\"","paragraph_id":"para_446"},{"text":"Rodríguez testified that outsourcing business to a \"lower tax","paragraph_id":"para_447"},{"text":"jurisdiction[]\" such as the U.S. Virgin Islands \"[had] been done","paragraph_id":"para_448"},{"text":"- 19 -","paragraph_id":"para_449"},{"text":"for a long time,\" for example, by \"companies like Microsoft,","paragraph_id":"para_450"},{"text":"Apple,\" and that such methods were \"highly publicized.\" Rodríguez","paragraph_id":"para_451"},{"text":"testified that several individuals in the U.S. Virgin Islands \"used","paragraph_id":"para_452"},{"text":"the same structure[]\" as the Strategy. TLS itself published an","paragraph_id":"para_453"},{"text":"article titled \"The Puerto Rican Miracle\" for prospective clients,","paragraph_id":"para_454"},{"text":"stating that \"[o]utsourcing [wa]s common and accepted in today's","paragraph_id":"para_455"},{"text":"business environment\" and many U.S. business owners could own a","paragraph_id":"para_456"},{"text":"company in Puerto Rico and outsource part of their business to","paragraph_id":"para_457"},{"text":"that company in order to retain profits from the outsourcing at a","paragraph_id":"para_458"},{"text":"4% tax rate. The district court correctly found that \"[t]he","paragraph_id":"para_459"},{"text":"documents and templates underlying the Strategy [we]re all","paragraph_id":"para_460"},{"text":"commonly used in the tax-planning industry,\" and TLS does not","paragraph_id":"para_461"},{"text":"contend otherwise.8","paragraph_id":"para_462"},{"text":"However, TLS appears to claim that one aspect of the","paragraph_id":"para_463"},{"text":"Strategy--the use of promissory notes and security agreements to","paragraph_id":"para_464"},{"text":"enable clients to access distributed profits--was not publicly","paragraph_id":"para_465"},{"text":"known. TLS's witnesses--Mr. Colombik and Mr. Runge--testified","paragraph_id":"para_466"},{"text":"that the use of the promissory notes and security agreements were","paragraph_id":"para_467"},{"text":"8 The district court also found that \"the documents and forms","paragraph_id":"para_468"},{"text":"that TLS use[d] to implement the Strategy [we]re not by themselves","paragraph_id":"para_469"},{"text":"protectable as trade secrets,\" \"[t]he documents and client","paragraph_id":"para_470"},{"text":"identities left exposed in the Dropbox account simply were not","paragraph_id":"para_471"},{"text":"protected to a reasonable degree,\" and \"TLS ha[d] not shown that","paragraph_id":"para_472"},{"text":"the documents and information underlying the Strategy were the","paragraph_id":"para_473"},{"text":"object of reasonable security measures, so those materials [were","paragraph_id":"para_474"},{"text":"not] trade secret[s] . . . .\"","paragraph_id":"para_475"},{"text":"- 20 -","paragraph_id":"para_476"},{"text":"central to the Strategy, and Mr. Runge testified that TLS invented","paragraph_id":"para_477"},{"text":"the method of allowing clients to access their profits through the","paragraph_id":"para_478"},{"text":"Strategy and that the \"combination of the[] aspects [of the","paragraph_id":"para_479"},{"text":"Strategy] [wa]s unique.\" Mr. Runge testified that he was unaware","paragraph_id":"para_480"},{"text":"that anyone else achieved the combination.","paragraph_id":"para_481"},{"text":"In contrast, Rodríguez testified that outsourcing and","paragraph_id":"para_482"},{"text":"then \"[taking income as] loans . . . over to the [United States]\"","paragraph_id":"para_483"},{"text":"had been done for a long time. He further testified that \"most of","paragraph_id":"para_484"},{"text":"the [tax avoidance] models in Puerto Rico came from [the] Virgin","paragraph_id":"para_485"},{"text":"Islands, where they've been using these models before\" and \"using","paragraph_id":"para_486"},{"text":"loans[] . . . [wa]s well-covered in many areas[] . . . with the","paragraph_id":"para_487"},{"text":"IRS and publicly with multi-national[] [companies] as well.\" The","paragraph_id":"para_488"},{"text":"district court did not resolve the conflicting testimony as to the","paragraph_id":"para_489"},{"text":"industry practice. But this is of no consequence. TLS could not","paragraph_id":"para_490"},{"text":"claim a trade secret protection simply because its loan strategy","paragraph_id":"para_491"},{"text":"was not publicly known. TLS also had to establish that this aspect","paragraph_id":"para_492"},{"text":"of the Strategy was not readily ascertainable from public sources.","paragraph_id":"para_493"},{"text":"On this issue, TLS presented no evidence. We thus conclude that","paragraph_id":"para_494"},{"text":"TLS failed to show that the Strategy was not readily ascertainable.","paragraph_id":"para_495"},{"text":"The district court stated that \"[t]he Strategy[] . . .","paragraph_id":"para_496"},{"text":"remain[ed] largely either unknown or inaccessible despite the","paragraph_id":"para_497"},{"text":"commonly known information underlying it\" and that \"the knowledge","paragraph_id":"para_498"},{"text":"of the Strategy originated with TLS and d[id] not appear to be","paragraph_id":"para_499"},{"text":"readily ascertainable by companies unaffiliated with TLS, so [the","paragraph_id":"para_500"},{"text":"- 21 -","paragraph_id":"para_501"},{"text":"Strategy] me[t] the statutory requirement under § 4132(a).\" These","paragraph_id":"para_502"},{"text":"statements appear to refer to TLS's documents describing the tax","paragraph_id":"para_503"},{"text":"scheme labeled as the \"Strategy\" as opposed to the substance of","paragraph_id":"para_504"},{"text":"the scheme. Mr. Runge testified that the \"services agreement\" for","paragraph_id":"para_505"},{"text":"outsourcing had been developed over years and was in its 60th","paragraph_id":"para_506"},{"text":"version by the time of trial. However, the proper inquiry is not","paragraph_id":"para_507"},{"text":"whether the documents describing TLS's tax scheme were readily","paragraph_id":"para_508"},{"text":"ascertainable but rather whether the \"substance\" of that tax scheme","paragraph_id":"para_509"},{"text":"was readily ascertainable. See Convolve, Inc. v. Compaq Comput.","paragraph_id":"para_510"},{"text":"Corp., 527 F. App'x 910, 918, 921–22 (Fed. Cir. 2013) (affirming","paragraph_id":"para_511"},{"text":"the district court's decision that the plaintiff failed to show","paragraph_id":"para_512"},{"text":"that the \"substance of the trade secret\" satisfied the elements of","paragraph_id":"para_513"},{"text":"a trade secret); Patriot Homes, Inc. v. Forest River Hous., Inc.,","paragraph_id":"para_514"},{"text":"512 F.3d 412, 415 (7th Cir. 2008) (holding that the plaintiff","paragraph_id":"para_515"},{"text":"failed to show the \"substance of the 'trade secret'\" and was not","paragraph_id":"para_516"},{"text":"entitled to a preliminary injunction because the plaintiff only","paragraph_id":"para_517"},{"text":"described it as a \"'playbook' for constructing modular homes\" and","paragraph_id":"para_518"},{"text":"failed to prove that the underlying information was not readily","paragraph_id":"para_519"},{"text":"available).","paragraph_id":"para_520"},{"text":"We conclude that TLS failed to establish that the","paragraph_id":"para_521"},{"text":"Strategy was a trade secret.9","paragraph_id":"para_522"},{"text":"9 The parties dispute whether a tax planning scheme can ever","paragraph_id":"para_523"},{"text":"be a trade secret. Congress amended the patent statute in 2011 to","paragraph_id":"para_524"},{"text":"limit the patentability of tax strategies. Leahy-Smith America","paragraph_id":"para_525"},{"text":"- 22 -","paragraph_id":"para_526"},{"text":"III. The Breach of Contract Claims","paragraph_id":"para_527"},{"text":"A.","paragraph_id":"para_528"},{"text":"TLS's second claim is that the defendants breached their","paragraph_id":"para_529"},{"text":"nondisclosure agreements by using knowledge gained from TLS to","paragraph_id":"para_530"},{"text":"provide tax services to former clients of TLS. The defendants","paragraph_id":"para_531"},{"text":"argue that those agreements are unenforceable. The district court","paragraph_id":"para_532"},{"text":"held that the defendants waived this argument and did not address","paragraph_id":"para_533"},{"text":"the argument on the merits.","paragraph_id":"para_534"},{"text":"The district court's finding of waiver is unsupported.","paragraph_id":"para_535"},{"text":"The defendants explicitly argued before the district court that","paragraph_id":"para_536"},{"text":"the nondisclosure agreements are unenforceable under the Puerto","paragraph_id":"para_537"},{"text":"Rico Supreme Court's decision in Arthur Young & Co. v. Vega III,","paragraph_id":"para_538"},{"text":"136 D.P.R. 157, 1994 P.R.-Eng. 909,262, 1994 WL 909262 (P.R. 1994),","paragraph_id":"para_539"},{"text":"a decision we describe later in detail. For present purposes, it","paragraph_id":"para_540"},{"text":"is sufficient to note that the Puerto Rico Supreme Court held","paragraph_id":"para_541"},{"text":"certain noncompete clauses invalid as contrary to public policy.","paragraph_id":"para_542"},{"text":"Here, the defendants argued that the nondisclosure agreements'","paragraph_id":"para_543"},{"text":"\"applied effect [wa]s the same as a non-competition clause\" that","paragraph_id":"para_544"},{"text":"\"infinitely precluded [them] from utilizing their skills and","paragraph_id":"para_545"},{"text":"knowledge to work in any such areas concerning the accounting","paragraph_id":"para_546"},{"text":"profession\" and thus the agreements \"amount[ed] to the equivalent","paragraph_id":"para_547"},{"text":"Invents Act, Pub. L. No. 112-29 § 14, 125 Stat. 284, 327–28 (2011).","paragraph_id":"para_548"},{"text":"We need not reach this issue as to trade secrets because we","paragraph_id":"para_549"},{"text":"conclude that TLS failed to prove that either the CPRs or the","paragraph_id":"para_550"},{"text":"Strategy satisfied the elements of a trade secret.","paragraph_id":"para_551"},{"text":"- 23 -","paragraph_id":"para_552"},{"text":"of a restrictive covenant not to compete[] [and] needed to comply","paragraph_id":"para_553"},{"text":"with Arthur Young.\" This is not a situation where the defendants","paragraph_id":"para_554"},{"text":"failed to adequately develop argumentation. The defendants","paragraph_id":"para_555"},{"text":"preserved the issue of enforceability.","paragraph_id":"para_556"},{"text":"The district court's decision involved a purely legal","paragraph_id":"para_557"},{"text":"question--whether the nondisclosure agreements here are","paragraph_id":"para_558"},{"text":"unenforceable as a matter of public policy--that was proper for","paragraph_id":"para_559"},{"text":"disposition on summary judgment. See Local Motion, Inc. v.","paragraph_id":"para_560"},{"text":"Niescher, 105 F.3d 1278, 1280 (9th Cir. 1997) (\"Whether the . . .","paragraph_id":"para_561"},{"text":"Agreement constituted a valid enforceable contract is a matter of","paragraph_id":"para_562"},{"text":"law, and therefore it was proper for the court to determine this","paragraph_id":"para_563"},{"text":"issue on summary judgment.\"); Cameron v. Vancouver Plywood Corp.,","paragraph_id":"para_564"},{"text":"266 F.2d 535, 538-39 (9th Cir. 1959) (\"Where the pleadings and","paragraph_id":"para_565"},{"text":"depositions show without genuine issue of fact that the contract","paragraph_id":"para_566"},{"text":"sued upon is contrary to public policy and void, entry of summary","paragraph_id":"para_567"},{"text":"judgment for the defendant is proper.\").","paragraph_id":"para_568"},{"text":"B.","paragraph_id":"para_569"},{"text":"On appeal, the defendants argue that the nondisclosure","paragraph_id":"para_570"},{"text":"agreements are unenforceable, and TLS argues that the","paragraph_id":"para_571"},{"text":"nondisclosure agreements are enforceable. We agree with the","paragraph_id":"para_572"},{"text":"defendants.","paragraph_id":"para_573"},{"text":"As the parties agree, the enforceability of the","paragraph_id":"para_574"},{"text":"contracts here is governed by Puerto Rico law. In Arthur Young,","paragraph_id":"para_575"},{"text":"the Puerto Rico Supreme Court addressed the enforceability of","paragraph_id":"para_576"},{"text":"- 24 -","paragraph_id":"para_577"},{"text":"noncompete agreements. 1994 WL 909262. There a former employee","paragraph_id":"para_578"},{"text":"had signed an agreement that prohibited him from providing","paragraph_id":"para_579"},{"text":"accounting services to the employer's clients for two years. Id.","paragraph_id":"para_580"},{"text":"The court held that the validity of such a prohibition is to be","paragraph_id":"para_581"},{"text":"evaluated based on the employer's \"legitimate interest\" and the","paragraph_id":"para_582"},{"text":"restriction on \"the employee's freedom of contract and the general","paragraph_id":"para_583"},{"text":"public's freedom of choice.\" Id. This is because an accounting","paragraph_id":"para_584"},{"text":"service concerns a client relationship where the \"clients' right","paragraph_id":"para_585"},{"text":"to select custodians of their financial affairs is paramount, and","paragraph_id":"para_586"},{"text":"[that right] may not be unreasonably encumbered.\" Id. (quoting","paragraph_id":"para_587"},{"text":"Mailman, Ross, Toyes & Shapiro v. Edelson, 444 A.2d 75, 80 (N.J.","paragraph_id":"para_588"},{"text":"Ch. Div. 1982)). The court held that the noncompetition term","paragraph_id":"para_589"},{"text":"\"should not [have] exceed[ed] twelve months\" and that the employer","paragraph_id":"para_590"},{"text":"was not justified in barring the employee from offering services","paragraph_id":"para_591"},{"text":"for two years. Id. It reached its decision by relying on Puerto","paragraph_id":"para_592"},{"text":"Rico's civil code statutes,10 other countries' civil laws, and","paragraph_id":"para_593"},{"text":"10 The court cited to Civil Code § 1207, which provides:","paragraph_id":"para_594"},{"text":"The contracting parties may make the agreement","paragraph_id":"para_595"},{"text":"and establish the clauses and conditions which","paragraph_id":"para_596"},{"text":"they may deem advisable, provided they are not","paragraph_id":"para_597"},{"text":"in contravention of law, morals, or public","paragraph_id":"para_598"},{"text":"order.","paragraph_id":"para_599"},{"text":"P.R. Laws Ann. tit. 31, § 3372 (emphasis added), and Civil Code","paragraph_id":"para_600"},{"text":"§ 1210, which provides:","paragraph_id":"para_601"},{"text":"Contracts are perfected by mere consent, and","paragraph_id":"para_602"},{"text":"from that time they are binding, not only with","paragraph_id":"para_603"},{"text":"regard to the fulfilment of what has been","paragraph_id":"para_604"},{"text":"- 25 -","paragraph_id":"para_605"},{"text":"common law doctrines. Notably, the court relied on authorities","paragraph_id":"para_606"},{"text":"from mainland U.S. jurisdictions in conducting its analysis.","paragraph_id":"para_607"},{"text":"TLS argues that a \"confidentiality clause\" is not a \"non-","paragraph_id":"para_608"},{"text":"compete clause\" and thus Arthur Young is inapplicable. But overly","paragraph_id":"para_609"},{"text":"broad nondisclosure agreements, while not specifically prohibiting","paragraph_id":"para_610"},{"text":"an employee from entering into competition with the former","paragraph_id":"para_611"},{"text":"employer, raise the same policy concerns about restraining","paragraph_id":"para_612"},{"text":"competition as noncompete clauses where, as here, they have the","paragraph_id":"para_613"},{"text":"effect of preventing the defendant from competing with the","paragraph_id":"para_614"},{"text":"plaintiff. See, e.g., Durham v. Stand-By Labor of Ga., Inc., 198","paragraph_id":"para_615"},{"text":"S.E.2d 145, 149 (Ga. 1973) (\"Covenants not to disclose and utilize","paragraph_id":"para_616"},{"text":"confidential business information are related to general covenants","paragraph_id":"para_617"},{"text":"not to compete because of the similar employer interest in","paragraph_id":"para_618"},{"text":"maintaining competitive advantage.\"); AMP Inc. v. Fleischhacker,","paragraph_id":"para_619"},{"text":"823 F.2d 1199, 1202, 1205 (7th Cir. 1987); Revere Transducers,","paragraph_id":"para_620"},{"text":"Inc. v. Deere & Co., 595 N.W.2d 751, 760–62 (Iowa 1999); Nasco,","paragraph_id":"para_621"},{"text":"Inc. v. Gimbert, 238 S.E.2d 368, 369 (Ga. 1977).","paragraph_id":"para_622"},{"text":"In Arthur Young, the Puerto Rico Supreme Court held that","paragraph_id":"para_623"},{"text":"the noncompete clause was \"null and void because it contravene[d]","paragraph_id":"para_624"},{"text":"public policy\" that a contract's \"prohibition cannot be extended","paragraph_id":"para_625"},{"text":"expressly stipulated, but also with regard to","paragraph_id":"para_626"},{"text":"all the consequences which, according to their","paragraph_id":"para_627"},{"text":"character, are in accordance with good faith,","paragraph_id":"para_628"},{"text":"use, and law.","paragraph_id":"para_629"},{"text":"Id. § 3375 (emphasis added).","paragraph_id":"para_630"},{"text":"- 26 -","paragraph_id":"para_631"},{"text":"beyond what is necessary to protect the former employer's","paragraph_id":"para_632"},{"text":"legitimate interests\" while \"unjustifiably restricting the","paragraph_id":"para_633"},{"text":"employee's freedom of contract and the general public's freedom of","paragraph_id":"para_634"},{"text":"choice.\" 1994 WL 909262.","paragraph_id":"para_635"},{"text":"The Puerto Rico Supreme Court also cited with approval","paragraph_id":"para_636"},{"text":"mainland U.S. case law concerning noncompete clauses. Related","paragraph_id":"para_637"},{"text":"mainland U.S. cases concerning noncompete clauses hold that overly","paragraph_id":"para_638"},{"text":"broad \"[c]onfidentiality agreements . . . constitute[] . . .","paragraph_id":"para_639"},{"text":"unreasonable restraints on trade which unduly restrict the free","paragraph_id":"para_640"},{"text":"flow of information necessary for business competition\" and are","paragraph_id":"para_641"},{"text":"thus unenforceable. AMP, 823 F.2d at 1202; Nasco, 238 S.E.2d at","paragraph_id":"para_642"},{"text":"369 (\"Covenants against disclosure, like covenants against","paragraph_id":"para_643"},{"text":"competition, affect the interests of this state, namely the flow","paragraph_id":"para_644"},{"text":"of information needed for competition among businesses, and hence","paragraph_id":"para_645"},{"text":"their validity is determined by the public policy of this state.\");","paragraph_id":"para_646"},{"text":"see also State Med. Oxygen & Supply, Inc. v. Am. Med. Oxygen Co.,","paragraph_id":"para_647"},{"text":"782 P.2d 1272, 1274–76 (Mont. 1989). A nondisclosure agreement is","paragraph_id":"para_648"},{"text":"overly broad if the restriction is \"[un]necessary for the","paragraph_id":"para_649"},{"text":"protection of the employer's business,\" \"unreasonably restrictive","paragraph_id":"para_650"},{"text":"of the employee's rights,\" and \"prejudicial to the public","paragraph_id":"para_651"},{"text":"interest.\" Revere Transducers, 595 N.W.2d at 762; see also State","paragraph_id":"para_652"},{"text":"Med., 782 P.2d at 1275; Nasco, 238 S.E.2d at 369–70.","paragraph_id":"para_653"},{"text":"Numerous courts have identified the types of agreements","paragraph_id":"para_654"},{"text":"in which restrictive clauses are overly broad. First, an","paragraph_id":"para_655"},{"text":"- 27 -","paragraph_id":"para_656"},{"text":"employer's interest does not extend to prohibiting the employee","paragraph_id":"para_657"},{"text":"from using general knowledge acquired by the employee:","paragraph_id":"para_658"},{"text":"It has been uniformly held that general","paragraph_id":"para_659"},{"text":"knowledge, skill, or facility acquired through","paragraph_id":"para_660"},{"text":"training or experience while working for an","paragraph_id":"para_661"},{"text":"employer appertain exclusively to the","paragraph_id":"para_662"},{"text":"employee. The fact that they were acquired or","paragraph_id":"para_663"},{"text":"developed during the employment does not, by","paragraph_id":"para_664"},{"text":"itself, give the employer a sufficient","paragraph_id":"para_665"},{"text":"interest to support a restraining covenant,","paragraph_id":"para_666"},{"text":"even though the on-the-job training has been","paragraph_id":"para_667"},{"text":"extensive and costly.","paragraph_id":"para_668"},{"text":"Follmer, Rudzewicz & Co. v. Kosco, 362 N.W.2d 676, 681 n.4 (Mich.","paragraph_id":"para_669"},{"text":"1984) (quoting Harlan M. Blake, Employment Agreements Not to","paragraph_id":"para_670"},{"text":"Compete, 73 Harv. L. Rev. 625, 652 (1960)); see also AMP, 823 F.2d","paragraph_id":"para_671"},{"text":"at 1202 (\"[A]n employee is free to take with him general skills","paragraph_id":"para_672"},{"text":"and knowledge acquired during his tenure with his former","paragraph_id":"para_673"},{"text":"employer.\"); Junker v. Plummer, 67 N.E.2d 667, 669 (Mass. 1946)","paragraph_id":"para_674"},{"text":"(\"The law is well settled that an employee upon terminating his","paragraph_id":"para_675"},{"text":"employment may carry away and use the general skill or knowledge","paragraph_id":"para_676"},{"text":"acquired during the course of the employment.\").","paragraph_id":"para_677"},{"text":"Second, a nondisclosure agreement is overly broad and","paragraph_id":"para_678"},{"text":"invalid when the agreement prohibits disclosure of information","paragraph_id":"para_679"},{"text":"that \"is not in fact confidential,\" because it is public knowledge.","paragraph_id":"para_680"},{"text":"Nagler v. Garcia, 370 F. App'x 678, 681 (6th Cir. 2010) (quoting","paragraph_id":"para_681"},{"text":"Follmer, 362 N.W.2d at 683); AssuredPartners, Inc. v. Schmitt, 44","paragraph_id":"para_682"},{"text":"N.E.3d 463, 475–76 (Ill. Ct. App. 2015) (holding unenforceable a","paragraph_id":"para_683"},{"text":"nondisclosure provision that protected virtually every kind of","paragraph_id":"para_684"},{"text":"- 28 -","paragraph_id":"para_685"},{"text":"information that the employee learned during his employment, even","paragraph_id":"para_686"},{"text":"if nonconfidential).","paragraph_id":"para_687"},{"text":"Third, a nondisclosure agreement is overly broad when it","paragraph_id":"para_688"},{"text":"extends to information properly provided to the defendant by third-","paragraph_id":"para_689"},{"text":"party sources. See Am. Software USA, Inc. v. Moore, 448 S.E.2d","paragraph_id":"para_690"},{"text":"206, 209 (Ga. 1994) (nondisclosure agreement was valid because it","paragraph_id":"para_691"},{"text":"did not apply to \"any information properly obtained from a","paragraph_id":"para_692"},{"text":"completely independent source\" (i.e., third parties)); Pederson v.","paragraph_id":"para_693"},{"text":"Arctic Slope Reg'l Corp., 421 P.3d 58, 70 (Alaska), cert. denied,","paragraph_id":"para_694"},{"text":"139 S. Ct. 427 (2018) (same); ACAS Acquisitions (Precitech) Inc.","paragraph_id":"para_695"},{"text":"v. Hobert, 923 A.2d 1076, 1090 (N.H. 2007) (same).","paragraph_id":"para_696"},{"text":"All of these factors exist here. The nondisclosure","paragraph_id":"para_697"},{"text":"agreement in the Rodríguez Agreement prohibited disclosure of","paragraph_id":"para_698"},{"text":"\"Confidential Information\" broadly defined as:","paragraph_id":"para_699"},{"text":"1.2.1. All information[] . . . regarding","paragraph_id":"para_700"},{"text":"(\"TLS\") business methods and procedures,","paragraph_id":"para_701"},{"text":"clients or prospective clients, agent lists,","paragraph_id":"para_702"},{"text":"marketing channels and relationships,","paragraph_id":"para_703"},{"text":"marketing methods, costs, prices, products,","paragraph_id":"para_704"},{"text":"formulas, compositions, methods, systems,","paragraph_id":"para_705"},{"text":"procedures, prospective and executed","paragraph_id":"para_706"},{"text":"contracts and other business arrangements,","paragraph_id":"para_707"},{"text":"proposals and project plans, and (\"TLS\")","paragraph_id":"para_708"},{"text":"Affiliates;","paragraph_id":"para_709"},{"text":"1.2.2. . . . any other information provided to","paragraph_id":"para_710"},{"text":"[Rodríguez] by (\"TLS\") or (\"TLS\") Affiliates","paragraph_id":"para_711"},{"text":"by or in connection with proposing or","paragraph_id":"para_712"},{"text":"delivering (\"TLS Services\") . . . ;","paragraph_id":"para_713"},{"text":"1.2.3. The identities of agents, contractors,","paragraph_id":"para_714"},{"text":"consultants, sales representatives, sales","paragraph_id":"para_715"},{"text":"associates, subsidiaries, strategic partners,","paragraph_id":"para_716"},{"text":"- 29 -","paragraph_id":"para_717"},{"text":"licensors, licensees, customers, prospective","paragraph_id":"para_718"},{"text":"customers, suppliers, or other service","paragraph_id":"para_719"},{"text":"providers or sources of supply including firms","paragraph_id":"para_720"},{"text":"in which a (\"TLS\") Principal may have an","paragraph_id":"para_721"},{"text":"ownership interest . . . ;","paragraph_id":"para_722"},{"text":"1.2.4. . . . any other information that","paragraph_id":"para_723"},{"text":"[Rodríguez] may obtain knowledge [sic] during","paragraph_id":"para_724"},{"text":"his/her tenure while working at (\"TLS\")[.]","paragraph_id":"para_725"},{"text":"The definition excluded:","paragraph_id":"para_726"},{"text":"1.3. . . . (a) information disclosed by one","paragraph_id":"para_727"},{"text":"Party with the prior written consent of the","paragraph_id":"para_728"},{"text":"other Party, (b) information that has been","paragraph_id":"para_729"},{"text":"previously disclosed by the other Party to the","paragraph_id":"para_730"},{"text":"general public, or (c) information that is","paragraph_id":"para_731"},{"text":"required to be disclosed pursuant to a valid","paragraph_id":"para_732"},{"text":"judicial court order[] . . . .","paragraph_id":"para_733"},{"text":"The nondisclosure agreement's broad scope extended on","paragraph_id":"para_734"},{"text":"its face to public information and general knowledge not particular","paragraph_id":"para_735"},{"text":"to TLS's business. For example, the agreement covered \"any other","paragraph_id":"para_736"},{"text":"information [Rodríguez] may obtain knowledge [sic] during his[]","paragraph_id":"para_737"},{"text":"tenure\" (subclause 1.2.4), \"[a]ll information, . . . regarding","paragraph_id":"para_738"},{"text":"[TLS's] business\" (subclause 1.2.1), and \"any other information","paragraph_id":"para_739"},{"text":"provided to [Rodríguez] by TLS . . . in connection with [its","paragraph_id":"para_740"},{"text":"services]\" (subclause 1.2.2), without regard to its","paragraph_id":"para_741"},{"text":"confidentiality. The district court admitted that \"it [wa]s","paragraph_id":"para_742"},{"text":"undisputable that the confidentiality clause is broad.\" Although","paragraph_id":"para_743"},{"text":"the nondisclosure agreement excluded protection of \"information","paragraph_id":"para_744"},{"text":"that ha[d] been previously disclosed by [TLS] to the general","paragraph_id":"para_745"},{"text":"public,\" this narrow limitation did not exclude information that","paragraph_id":"para_746"},{"text":"was otherwise publicly available or that TLS disclosed to the","paragraph_id":"para_747"},{"text":"- 30 -","paragraph_id":"para_748"},{"text":"public after Rodríguez obtained such knowledge or information.","paragraph_id":"para_749"},{"text":"TLS admits, for example, that the nondisclosure agreement","paragraph_id":"para_750"},{"text":"protected TLS's operating agreement, even though entire sections","paragraph_id":"para_751"},{"text":"of that agreement can be found on the internet. The agreement","paragraph_id":"para_752"},{"text":"also covered general knowledge that Rodríguez acquired as an","paragraph_id":"para_753"},{"text":"employee, and information that was received from third parties,","paragraph_id":"para_754"},{"text":"such as TLS's former clients.","paragraph_id":"para_755"},{"text":"The Rodríguez Agreement's astounding breadth and lack of","paragraph_id":"para_756"},{"text":"any meaningful limitation restricted Rodríguez's freedom to","paragraph_id":"para_757"},{"text":"compete. The nondisclosure agreement \"exceed[ed] the real need to","paragraph_id":"para_758"},{"text":"protect [TLS] from . . . competition,\" essentially tied TLS's","paragraph_id":"para_759"},{"text":"clients to its services, and \"excessively and unjustifiably","paragraph_id":"para_760"},{"text":"restrict[ed] . . . the general public's freedom of choice.\" Arthur","paragraph_id":"para_761"},{"text":"Young, 1994 WL 909262. Similar broad agreements have been","paragraph_id":"para_762"},{"text":"uniformly held invalid. See, e.g., Nasco, 238 S.E.2d at 369–70","paragraph_id":"para_763"},{"text":"(nondisclosure agreement prohibiting former employee from","paragraph_id":"para_764"},{"text":"disclosing \"any information\" relating to employer's business was","paragraph_id":"para_765"},{"text":"unenforceable); State Med., 782 P.2d at 1273–75 (same); AMP, 823","paragraph_id":"para_766"},{"text":"F.2d at 1202; (same); Nagler, 370 F. App'x at 681 (nondisclosure","paragraph_id":"para_767"},{"text":"agreement prohibiting business partner from disclosing","paragraph_id":"para_768"},{"text":"nonconfidential information was unenforceable). Based on Arthur","paragraph_id":"para_769"},{"text":"Young and case law from the mainland U.S., we conclude that the","paragraph_id":"para_770"},{"text":"Puerto Rico Supreme Court would apply the principles articulated","paragraph_id":"para_771"},{"text":"in Arthur Young to the nondisclosure agreement here and that it is","paragraph_id":"para_772"},{"text":"- 31 -","paragraph_id":"para_773"},{"text":"so broad as to be unenforceable.","paragraph_id":"para_774"},{"text":"The ASG Agreement contained language similar to that in","paragraph_id":"para_775"},{"text":"the Rodríguez Agreement, and suffered from the same problems as","paragraph_id":"para_776"},{"text":"the Rodríguez Agreement.11 Although TLS suggests that Arthur Young","paragraph_id":"para_777"},{"text":"does not apply to the ASG Agreement because it was not an","paragraph_id":"para_778"},{"text":"employment contract, the Puerto Rico Supreme Court has found","paragraph_id":"para_779"},{"text":"noncompetition clauses in agreements other than employment","paragraph_id":"para_780"},{"text":"contracts. See Rojas-Buscaglia v. Taburno-Vasarhelyi, No. CV 13-","paragraph_id":"para_781"},{"text":"1766, 2015 WL 13547579, at *1 (D.P.R. July 8, 2015) (discussing","paragraph_id":"para_782"},{"text":"Puerto Rico cases, including Martin's BBQ v. Garcia De Gracia, 178","paragraph_id":"para_783"},{"text":"P.R. Dec. 978, 990 (P.R. 2010) (franchise contracts)).","paragraph_id":"para_784"},{"text":"While there was no separate agreement between TLS and","paragraph_id":"para_785"},{"text":"GOS, the district court assumed that GOS was bound by the ASG and","paragraph_id":"para_786"},{"text":"Rodríguez Agreements.12 Thus, the invalidity of any nondisclosure","paragraph_id":"para_787"},{"text":"agreement with GOS follows from the invalidity of the ASG and","paragraph_id":"para_788"},{"text":"Rodríguez agreements.","paragraph_id":"para_789"},{"text":"Here, we hold only that the nondisclosure provisions","paragraph_id":"para_790"},{"text":"concerning confidentiality in the Rodríguez and ASG Agreements are","paragraph_id":"para_791"},{"text":"11 TLS argues that Rodríguez was bound by the ASG Agreement.","paragraph_id":"para_792"},{"text":"Even if Rodríguez had been initially bound by the ASG Agreement,","paragraph_id":"para_793"},{"text":"the later Rodríguez Agreement superseded the ASG Agreement as to","paragraph_id":"para_794"},{"text":"Rodríguez. Thus, he was not bound by the nondisclosure provision","paragraph_id":"para_795"},{"text":"of the ASG Agreement.","paragraph_id":"para_796"},{"text":"12 The district court appears to have concluded that GOS was","paragraph_id":"para_797"},{"text":"bound by the nondisclosure agreements because Rodríguez controlled","paragraph_id":"para_798"},{"text":"GOS. We need not determine whether GOS was bound because we hold","paragraph_id":"para_799"},{"text":"that the nondisclosure agreements are unenforceable in any event.","paragraph_id":"para_800"},{"text":"- 32 -","paragraph_id":"para_801"},{"text":"unenforceable and do not reach the question whether other","paragraph_id":"para_802"},{"text":"provisions of the Agreements survive. We decline to rewrite the","paragraph_id":"para_803"},{"text":"nondisclosure agreements by narrowing their scope to be","paragraph_id":"para_804"},{"text":"reasonable. The Puerto Rico Supreme Court has held in the context","paragraph_id":"para_805"},{"text":"of noncompete agreements that courts may not \"modify[] the will of","paragraph_id":"para_806"},{"text":"the parties to adjust [the agreements] to reasonable standards.\"","paragraph_id":"para_807"},{"text":"Arthur Young, 1994 WL 909262; see also PACIV, Inc. v. Perez Rivera,","paragraph_id":"para_808"},{"text":"159 D.P.R. 523, 2003 WL 21212748, P.R. Offic. Trans. (P.R. 2003)","paragraph_id":"para_809"},{"text":"(holding that an overly broad noncompete agreement \"result[ed] in","paragraph_id":"para_810"},{"text":"the nullity of the agreement without any possibility of allowing","paragraph_id":"para_811"},{"text":"a modification\" and \"the severability clause [of the agreement","paragraph_id":"para_812"},{"text":"did] not save those clauses that d[id] comply with [the court's]","paragraph_id":"para_813"},{"text":"pronouncements . . . [and] the agreement [wa]s void in its","paragraph_id":"para_814"},{"text":"entirety\").13","paragraph_id":"para_815"},{"text":"Here, the defendants argue that the same rule applies to","paragraph_id":"para_816"},{"text":"nondisclosure agreements and that the nondisclosure agreements","paragraph_id":"para_817"},{"text":"here are invalid in their entirety. TLS fails to argue that some","paragraph_id":"para_818"},{"text":"portion of the nondisclosure agreements could survive a","paragraph_id":"para_819"},{"text":"13 We note that other mainland U.S. courts have reached the","paragraph_id":"para_820"},{"text":"same conclusion as to nondisclosure agreements. See AMP, 823 F.2d","paragraph_id":"para_821"},{"text":"at 1202 (voiding nondisclosure agreement in its entirety without","paragraph_id":"para_822"},{"text":"severance); State Med., 782 P.2d at 1973–75 (same); Nasco, 238","paragraph_id":"para_823"},{"text":"S.E.2d at 369–70 (same); see also Broadley v. Mashpee Neck Marina,","paragraph_id":"para_824"},{"text":"Inc., 471 F.3d 272, 274–76 (1st Cir. 2006) (holding that the","paragraph_id":"para_825"},{"text":"district court's rewriting of an overly broad and unenforceable","paragraph_id":"para_826"},{"text":"exculpatory clause under admiralty law was against sound public","paragraph_id":"para_827"},{"text":"policy).","paragraph_id":"para_828"},{"text":"- 33 -","paragraph_id":"para_829"},{"text":"determination that they were unreasonably broad and thus waived","paragraph_id":"para_830"},{"text":"such an argument. See Ortega Cabrera v. Municipality of Bayamon,","paragraph_id":"para_831"},{"text":"562 F.2d 91, 102 n.10 (1st Cir. 1977).","paragraph_id":"para_832"},{"text":"The district court erred by granting TLS's summary","paragraph_id":"para_833"},{"text":"judgment motion and denying the defendants' cross-motion as to the","paragraph_id":"para_834"},{"text":"claim for breach of nondisclosure agreements.","paragraph_id":"para_835"},{"text":"IV. Conclusion","paragraph_id":"para_836"},{"text":"We reverse the district court's decisions because TLS","paragraph_id":"para_837"},{"text":"failed to prove its trade secret claims, and because the","paragraph_id":"para_838"},{"text":"nondisclosure agreements are unenforceable. 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