Web content and domain names denied trade secret status

Dynamic Scales hired Ivan Paramanandam (“Ivan”) and his consulting firm to develop an online retail store to sell scales. Ivan developed the site, and registered a staggering 400 domain names to be used in connection with it. Eventually the Dynamic Scales site became the largest online retail store in the scale industry.

After a dispute over compensation for his work, Ivan informed Dynamic Scales that he wished to get out of the scale business, and his relationship with Dynamic Scales was terminated. A few days later, however, Dynamic Scales learned that Ivan had set up his own online retail store. Ivan’s new site was “practically identical in both content and appearance” to the Dynamic Scales site.

Despite the striking similarities between the websites, Dynamic Scales forsook an action in federal court for copyright infringement, and instead filed an action in state court for violation of Indiana’s trade secrets statute [Ind. Code § 24-2-3-1 et seq.]. The complaint alleged that Ivan had misappropriated “[t]he information contained on [the Dynamic Scales] website” and the “domain names developed, created, and maintained by and for Dynamic Scales.”

Dynamic Scales sought a preliminary injunction against Ivan, and the trial court granted the request. Ivan sought review of the trial court’s award, and the appellate court reversed. It concluded that Dynamic Scales had failed to present a prima facie case of misappropriation of trade secrets.

One of the owners of Dynamic Scales had testified that it had taken no steps at all to protect the content of its website. To the contrary, he testified that “[w]e chose to show all our cards to our competition.” He further testified that information was “left out for the general public to see.” Given the lack of reasonable efforts to maintain the secrecy of the information, and the fact that the 400 domain names had been registered to make the site readily available to potential customers, the court held that the district court abused its discretion in awarding injunctive relief.

Paramanandam v. Herrmann, — N.E.2d —, 2005 WL 1220162 (Ind.App., May 24, 2005).