Federal Circuit Update: The High Cost of Vague Trade Secret Identification
Written by Ben Esplin
The most significant technology sales often reach a high-risk inflection point where a potential customer hires elite technical evaluators to "look under the hood" of your innovation. This due diligence process is essential for growth but creates a massive exposure point if handled without a rigorous operational protocol. In the recent Federal Circuit decision of Applied Predictive Technologies (APT) v. MarketDial, APT allowed third-party consultants to perform value analysis on their software for potential clients; those consultants later allegedly used that knowledge to co-found a direct competitor. Despite the clear competitive threat, APT lost their trade secret misappropriation claim on summary judgment because they failed to meet the foundational legal requirement of identifying exactly what their secrets were.
The court’s decision highlights a fatal mistake often made during the pressure of litigation: the "dump and pray" approach to evidence. APT provided 14 broad categories of secrets and buried the court under more than 200 exhibits—including expert reports and technical guides—without explaining which specific logic or data structures within those volumes were actually proprietary. The Federal Circuit was blunt in its refusal to play detective, stating that it is not a judge's job to "assemble the bits and pieces" of a trade secret from a mountain of unexplained data. When a plaintiff fails to define their property with precision, the court will not step in to define it for them.
To protect your "secret sauce" during these sales cycles (as well as other moments of trade secret sharing), you must treat documentation as an operational prerequisite rather than a legal afterthought. Effective intellectual property management requires a selective revelation protocol that correlates strategic disclosure of trade secret information to a pre-existing catalogue of trade secret assets. Defining your secrets prior to sharing outside the company, and while exploratory relationships are still friendly is far more effective than trying to invent a narrative years later in a deposition.
This identification burden is a universal challenge across the tech landscape, whether you are in gaming, Web3, or signal processing. In the gaming world, this means specifically identifying physics engine optimizations before a publisher’s auditor reviews your code; in Web3, it involves logging proprietary "off-chain" logic before an institutional partner’s security firm begins their audit. Even in signal processing, the secret is often the specific measurement method used to achieve a result rather than the result itself. In every instance, a protocol for identifying the secret before the third-party evaluator arrives is what creates a defensible moat around your technical achievement.
As I have argued in previous posts, modern innovation is ultimately about achieving more with less—a principle that applies just as strongly to legal strategy as it does to neural architectures. A single, precisely defined trade secret that can be explained clearly is infinitely more valuable in court than a thousand unexplained exhibits. Intellectual property conservation requires us to focus on the purity and clarity of our claims to ensure our most valuable assets are protected without wasted effort. The most resource-efficient way to secure your company's future is to ensure your disclosure protocols are so robust that your innovation becomes as legally undeniable as it is technically superior.