MISAPPROPRIATION OF TRADE SECRETS -- ACCRUAL OF STATUTE OF LIMITATIONS

Under Colorado law, an action for misappropriation of a trade secret must be commenced within "three years after the misappropriation is discovered or by the exercise of reasonable diligence should have been discovered." C.R.S. sec. 7-74-107. Further, "a continuing misappropriation constitutes a single claim." Id.

In a newly published case, the Colorado Court of Appeals was faced with the following question with respect to accrual of this statute of limitations: "Where a plaintiff alleges more than one misappropriation of a trade secret or related trade secrets by the same party, is there a single accrual date coinciding with the first misappropriation, or are there separate accrual dates coinciding with the dates of each misappropriation?" Gognat v. Ellsworth, Case Nos. 08CA1158 & 08CA1745 (Colo App., Sept. 17, 2009). The Court held that the statute provides for a single accrual date where there are multiple misappropriations of a single trade secret or of multiple, related trade secrets, and not separate accrual dates for each of the misappropriations. The Court reasoned that the statutes explicit rejection of the "continuing violation" theory "evidences a clear legislative intent that multiple misrepresentations by the same party be treated as 'a single claim' for accrual purposes." Id.

In the Gognat case, the plantiff alleged that the defendants misappropriated a method for identifying and developing oil and natural gas reserves in western Kentucky. Shortly after acquiring this information from the plaintiff, the defendants began acquiring leases in a particular area in western Kentucky, referred to in the case as the "first area." Some time later, the defendants began acquiring leases in a different area in western Kentucky, referred to as the "second area." The Court concluded that the plaintiff had knowledge of the leases in the first area in or before 1999, and despite the fact that the plaintiff alleged to have become aware of the leases in the second area in 2005, the statute of limitations as to all claims of misappropriation accrued from the earlier date. Therefore, because the plaintiff's action was commenced in 2005, well after expiration of the three-year statute of limitations, the Court upheld the trial court's dismissal of the misappropriation claims based on the statute of limitations.


Posted By: Brent W. Houston, Esq.