Who has standing to sue for trade secret misappropriation? Can a person sue to protect a trade secret they misappropriated from someone else? Is mere "possession" of the trade secret enough for standing to sue and entitlement to a remedy? Or does a complainant have to prove they are the "owner" of the trade secret in a more formal sense?
A new case suggests the answer may be: "Yes, a person can probably sue to protect a trade secret that they misappropriated from someone else, at least under state law, but not under federal law."
A recent Tenth Circuit case, Snyder v. Beam, addresses this question for the first time. In this post, I'll discuss Snyder and its implications, and I will also highlight a 2023 article by Charles Tait Graves, revealing that this issue had been boiling up on the state law side for some time. Snyder did not come out of the blue. Rather, the passage of a federal trade secret statute with a divergent rule has simply brought the issue to the fore.
The UTSA and DTSA's Contrasting Approaches to Ownership and Standing
Snyder v. Beam, which I'll discuss in a second, forces us to recognize something no one (other than Charles Tait Graves) has thought much about: The Uniform Trade Secrets Acts (UTSA's) of most U.S. states permit the mere "possessor" of a trade secret to sue for misappropriation.
Under most state trade secret laws, the plaintiff in a trade secret case usually does not have to prove they are the formal "owner" (e.g. the developer, the assignee, or the licensee). It is enough to be a mere "possessor" of the information, so long as this possessor can satisfy the elements of a trade secret, including that they have taken "reasonable" measures to protect it.
This contrasts with the approach in the Defend Trade Secrets Act (DTSA), passed in 2016. The DTSA limits standing and right to a remedy to an "owner." See 18 U.S.C. § 1836 ("An owner of a trade secret that is misappropriated may bring a civil action under this subsection...").
The DTSA also defines "owner" for trade secret law purposes: Under 18 U.S.C. § 1839(4), "the term 'owner,' with respect to a trade secret, means the person or entity in whom or in which rightful legal or equitable title to, or license in, the trade secret is reposed."
(This is very similar to the definition of "owner" in the Texas UTSA, passed in 2013, which states that "'Owner' means, with respect to a trade secret, the person or entity in whom or in which rightful, legal, or equitable title to, or the right to enforce rights in, the trade secret is reposed.")
What, then, does "owner" really mean under the DTSA?
In my view, "owner" in this context means something more than than mere possession. Probably, it means a status akin to: developer, joint developer, assignee, exclusive license, and maybe/possibly also a non-exclusive licensee with permission to use the information, but I am not sure yet.
Also, I think the words "rightful legal or equitable" are doing a lot of work. I don't think someone who misappropriated a trade secret from someone else can qualify as having "rightful legal or equitable title." That said, what the DTSA means by "equitable title" is an open question. There is a distinction in property law between "legal" and "equitable" title, which could apply here, though I don't yet know how.
Finally, ideally contracts would be in place giving the answer as to who has a right to sue. For example, if a company gives a license to a trade secret to someone else under a contract, ideally, this contract will specify whether the licensee can sue to protect that secret.
(Please email me if you disagree with this idea of what "owner" means at camilla.hrdy@rutgers.edu. I want to know your view).
We tend to assume the DTSA and UTSA are largely identical. But standing is one of the few places where the DTSA and UTSA diverge, and where the DTSA seems to take a minority position as compared to the states.
The DTSA Takes A Minority Position
Most states, like the UTSA itself, do not imply that only an "owner" can sue to protect a trade secret.
The Beck Reed Riden 50-state-survey shows that most states, following the UTSA, refer only to a trade secret of "another." See UTSA, § 1 ("Misappropriation" means... acquisition of a trade secret of another ... or disclosure or use of a trade secret of another ...").
Most states, following the UTSA, entitle a "complainant" to seek remedies. See UTSA, § 3 ("[A] a complainant is entitled to recover damages for misappropriation.").
Most states, following the UTSA, do not imply that the person who must take "reasonable efforts" to protect a trade secret must be the "owner." See UTSA, § 1 ("[A trade secret must be] the subject of efforts that are reasonable under the circumstances to maintain its secrecy.")
In contrast, only a few state statutes suggest that only an "owner" can sue. See, e.g., North Carolina, Trade Secrets Protection Act, Art. 24, § 66-153 ("Action for misappropriation. The owner of a trade secret shall have remedy by civil action for misappropriation of his trade secret.").
Iowa specifically changed the language of its law based on the UTSA to reference "owner" rather than "complainant".
And then some states like Texas and Colorado (at issue in Snyder v Beam, below) do refer repeatedly to "owner," but not necessarily in a way that limits the right to pursue remedies for misappropriation to that entity.
Snyder v. Beam (10th Cir. 2025)
A recent Tenth Circuit case, Snyder v. Beam, addresses, for the first time, how the DTSA and UTSA rules on ownership and standing-to-sue compare.
To be clear: At factual level, this is a very odd case. As R. Mark Halligan put it in his post on Reuters: "This trade secret misappropriation lawsuit has an interesting twist. ..."
Usually, the plaintiff in a trade secret case is an employer suing an employee for taking information that clearly belonged to the employer. So if "ownership" comes up at all, the question often is whether the employee is the owner (e.g. because she developed the secret outside work hours) or the employer is the owner (e.g. because the employee assigned the trade secret to the employer through contract or was "hired to invent" under common law rules, etc.). This is analogous to the copyright "work-made-for-hire" issue.
But the Snyder v. Beam case had to confront a different scenario: where an employee was suing its former employer for trade secret misappropriation. This required the court to address the unresolved issues over ownership and standing pursuant to the UTSA and DTSA.
The fact pattern is as follows. An employee (Snyder) took trade secrets (a broker list) from his former employer (Guardian), from whom Snyder was terminated, to his new employer (Beam). Snyder used the list in the course of work for his new job at Beam, and he shared the whole list (apparently accidentally) with Beam. Beam later terminated him for unrelated reasons, but kept using the Guardian list. Snyder tried to sue Beam for misappropriation under the Colorado UTSA and the DTSA, arguing that Beam misappropriated "his" (Guardian's) broker list.
Snyder lost the case at the lower court, because the court found he was not an "owner" with standing to sue. Snyder also lost the case on appeal to the Tenth Circuit because the court found Snyder failed to take "reasonable" steps to protect his trade secret. (Indeed, he apparently shared the whole broker list with his new employer Beam without insisting on confidentiality.) So he lost his trade secret case.
But the Tenth Circuit, even as it held for the defendant Beam, overruled the lower court's finding that Snyder lacked standing to sue under Colorado trade secret law.
The Tenth Circuit held that under Colorado's version of the UTSA, a "possessor" can sue for misappropriation, even if they are not an "owner" who could sue under the federal DTSA (which, again, gives only an "owner" the ability to bring a claim).
The Tenth Circuit suggested that Synder could potentially have had standing to sue on a Colorado UTSA claim against Beam as a "possessor," even though he took the broker list from Guardian and thus could not have sued under the DTSA.
Thus, the lower court had erroneously "entered summary judgment against Snyder because it found he provided insufficient evidence of his 'ownership' of the Guardian Broker List..."
The Tenth Circuit explained:
" There is at least one major distinction the between the two statutes. The DTSA expressly allows only an "owner" to pursue a claim for misappropriation. ...But the [Colorado] CUTSA uses different language to establish who can bring a lawsuit for misappropriation of a trade secret. Although it defines a trade secret by reference to an "owner" of the secret,...it states that a trade secret misappropriation claim may be filed by a "complainant," ... The terms "owner" and "complainant" are not defined in the statute. ...[Case law applying the Colorado UTSA has held that] the first element as possession, not ownership, of a trade secret."
Charles Tait Graves on How We Got Here
Very few people have written on this issue, and there is significant confusion. Therefore, I wanted to bring to light a fantastic article by Charles Tait Graves, a partner at Wilson Sonsini and Adjunct Professor at UC San Francisco Law, addressing this precise question, published in 2023.
I highly recommend this article for anyone wishing a deeper understanding of how we got to the curious rule that a mere possessor can sue for trade secret misappropriation. Some may think this case came out of the blue, but Graves shows that it did not.
In his article, "The Curiosities of Standing," Graves shows that, following an influential 2001 case, DTM v. AT&T, courts started holding that anyone with "possession" of a trade secret could sue for misappropriation. Courts held there was no formal ownership requirement. Instead, the crucial question was seen as "possession."
DTM v. AT&T was a Fourth Circuit case from 2001 applying the Maryland Uniform Trade Secrets Act (UTSA). DTM, the plaintiff, alleged that AT&T misappropriated DTM's trade secrets. However, defendant AT&T obtained evidence, during discovery, "that DTM's claimed trade secrets related to technology that DTM misappropriated from the United States." In other words, AT&T argued, DTM should not be able to sue us for misappropriation when in DTM itself misappropriated the trade secret form the US government.
However, the Fourth Circuit held that even a misappropriator can sue to protect a trade secret it possesses, at least under state laws like Maryland's, which do not require formal ownership. Mere possession can be sufficient for standing. To quote the court: "[O]ne who possesses non-disclosed knowledge may demand remedies as provided by the Act against those who "misappropriate" the knowledge ...fee simple ownership in its traditional sense is not an element of a trade secrets misappropriation claim in Maryland."
Graves shows that many courts have followed the DTM rule, holding anyone with "standing" can sue to protect a trade secret, even if they did not develop the information; even if they do not have a lawful license or proof of assignment from the developer; and even may have derived the information from someone else.
Courts like DTM Graves argued, are influenced by a "relational" view of trade secret law, which looks mainly at the breach of duty or other "bad act" as between the plaintiff and the defendant in the case-at-bar, rather than a "property" view, which would ask, "is plaintiff really the 'owner' of this property with lawful title?"
There are several quotes from DTM court that strongly support Graves' assessment (such as the court's statement that "... [w]hile trade secrets are considered property for various analyses...the inherent nature of a trade secret limits the usefulness of an analogy to property in determining the elements of a trade-secret misappropriation claim. ... Thus, one who possesses non-disclosed knowledge may demand remedies as provided by the Act against those who "misappropriate" the knowledge.").
I will also add that there seems to be a simple protectionist/utilitarian component to the court's reasoning: If the goal of trade secret law is to protect trade secrets against disclosure, then giving more people standing to sue to prevent said disclosure would seem to be a better stance.
At least that would be my generous assessment of the policy. After all, scholars like Michael Risch argue that the main purpose of trade secret law is to avoid wasteful expenditures on secrecy precautions. If a misappropriator like Snyder is willing to foot the bill to protect the information, then the original owner (here, Guardian) would save resources. (Maybe that's why Guardian was not intervening in the case opposing Snyder's claim? The enemy of my enemy is my friend.)
There Is A Middle Ground
Graves astutely points out in his article that there is a middle ground, a "half way" position between the two extremes of ownership versus mere possession.
The [DTM] court posed the standing question between two extremes: must a plaintiff have ownership “in the sense of fee simple absolute title,” or by contrast does mere “possession” suffice to sustain a misappropriation claim? By contrast, the defendant argued for a more nuanced middle position: that standing required either ownership or “assignment, license, or some other means of conveyance from the trade-secrets owner or discoverer such that the owner no longer has a right to use the trade secret[.]” (Graves, 182)
I agree. In my opinion, the rule should be (under the UTSA and states that adopt uniform versions of it) that a person has standing to sue only if they are a lawful possessor.
A lawful possessor would exclude people who are themselves misappropriators of the information. This would include: a developer or joint-developer (who did not transfer away their rights), an assignee (e.g. employer of employee inventor), a licensee, or even someone who merely possesses a trade secret, unless the defendant can prove the plaintiff misappropriated it.
This seems to be what the dissent-in-part (Judge Bacharach) thought the rule was. Judge Bacharach stated the rule as being that "lawful possessors can sue for misappropriation. ... Colorado law allows suit by lawful possessors of the information even if they aren't considered owners in a conventional sense."
However, Judge Bacharach did not think it was clear from the record that Snyder was a misappropriator. Judge Bacharach would have remanded the case to resolve remaining fact questions, writing that:
"Beam argued in its summary-judgment motion that Mr. Snyder didn't lawfully possess the broker list. But he testified that Guardian had given him the right to possess the list. This testimony creates a genuine fact-question at the summary-judgment stage."
To me (and to the majority), the facts very strongly suggested Snyder was not a lawful possessor because he took the list from his former employer. The sequence of events, albeit as described by the Tenth Circuit majority, were that:
"While working for Guardian, Snyder acquired a national customer list of over 40,000 insurance broker names (the Guardian Broker List). In February 2015, while still a Guardian employee, Snyder downloaded this national customer list from Guardian's client-relationship-management software...Later that same day, Snyder attached the Guardian Broker List to an email he sent to himself from his Guardian work email to his personal Hotmail account. All the customer information on the Guardian Customer List was taken from Guardian's files. The metadata showed that Snyder last modified the Guardian Broker List only "three minutes after it was created[,]" ... which confirms he made no meaningful additions after he downloaded it from Guardian's files. ...
[After he left Guardian to work for Beam, Snyder] ... accidentally distributed the Guardian Broker List to numerous Beam employees[.]"
As depicted above, this looks like classic misappropriation: disclosure of a trade secret in breach of a duty to maintain secrecy and/or acquisition of trade secrets by improper means, due to Snyder's sending an email to his personal email account (assuming this was not permitted by Guardian).
However, Judge Bacharach thought there was a fact question on this issue. To be fair, at least three reasonable minds clearly differ... So maybe Judge Bacharach is right that there is a fact question.
In any case, I think Tait Graves and Judge Bacharach are correct to argue for a standing rule that is more than mere possession. The rule is, or should be, a "lawful possession" standard. Those who are misappropriators of trade secrets are not lawful possessors. They cannot sue to protect trade secrets under the UTSA. They are not "owners" who can sue under the DTSA.
Applying this standard, Snyder could not sue under either state or federal law, assuming we think there are enough facts in the record showing he misappropriated the list from Guardian.
On the other hand, if Snyder picked up the list innocently while at Guardian, without being under a duty of secrecy or a duty not to share the information, then he would not be a misappropriator and would be a lawful possessor. He could sue under the UTSA. I am not, however, certain he could sue under the DTSA. As said above, I think "owner" under the DTSA is narrower. Snyder was not a developer or joint developer. He was not an assignee. He was not apparently a licensee. Although he seems to have argued he was a non-exclusive licensee with permission to use the information, I am not certain this would be enough.
Implications for AI
(For those with AI fatigue, stop now! And as an aside, I promise this post was not written or brainstormed by AI in any part. This is by me, a human.)
I have been thinking a lot about the ownership and standing questions lately, especially with regard to AI.
Take the following two scenarios.
Scenario 1: User 1 inputs its trade secret into a generative AI model, such as ChatGPT, Gemini, or Claude, etc., while performing work. The AI model trains on the information and shares it with someone else, User 2. User 2 adopts the trade secret, keeps it from becoming "generally known," and uses "reasonable measures" to protect it, thus maintaining the existence of a trade secret. Then a third party, perhaps an employee or business partner, misappropriates the trade secret from User 2. Can User 2 sue the third party for trade secret misappropriation?
Scenario 2: A generative AI model independently develops a new trade secret in a response to a user's prompts. If the user adopts this information, and a third party misappropriates it, can the user sue to protect this secret? The user is clearly a "possessor," but are they really the owner of the trade secret? After all, they do not have proof of a contractual assignment or license from the developer, as would likely be the case if this were an employee-developed invention. They did not develop the information, at least not on their own. (Assume they are not a joint developer).
If we apply a "lawful possession" standard, I think the answer in both cases would still be yes. The users can sue, at least under many states' laws.
