Computer Associates International, Inc. v. Altai, Inc.

United States Court of Appeals for the Second Circuit · 1995 · Corporations

CorporationsTrade secret misappropriationStatute of limitationsTexas lawtrade secretsstatute of limitationsdiscovery ruleopen courts

Facts

A former CA employee, Claude F. Arney III, left CA to work for Altai, a competitor. Arney took copies of source code listings for two versions of CA's ADAPTER program, and ADAPTER was used by Arney, without Altai's knowledge, in formulating Altai's OSCAR 3.4 program. After learning that ADAPTER had been used in developing OSCAR 3.4, Altai created OSCAR 3.5 without Arney's involvement and without using ADAPTER. CA sued Altai for copyright infringement and misappropriation of trade secrets, and on remand the district court held the trade secret claim barred by Texas's two-year limitations period.

Issue

Whether Texas law applies the discovery rule to claims for misappropriation of trade secrets under Texas Civil Practice & Remedies Code § 16.003(a), and if not, whether applying that two-year limitations period to such claims violates the open courts provision of article I, section 13 of the Texas Constitution.

Rule

Under the Texas Supreme Court's answers to the certified questions in this case, the discovery rule does not apply to claims for misappropriation of trade secrets under Texas Civil Practice & Remedies Code § 16.003(a), and application of that statute's two-year limitations period to such claims does not contravene the open courts provision of article I, section 13 of the Texas Constitution.

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Blue Mesa Analytics, a software firm in Austin, alleges that a former engineer secretly copied proprietary data-processing routines in January 2020 and gave them to his new employer, Red Willow Systems in Dallas. Blue Mesa did not discover the alleged misuse until April 2023 and filed a Texas trade secret misappropriation claim in June 2023.

Under the governing rule, what is the strongest argument for Red Willow Systems?

Explanation. The controlling rule is that Texas Civil Practice & Remedies Code § 16.003(a) supplies a two-year limitations period for trade secret misappropriation claims, and the discovery rule does not apply to postpone accrual. Because the alleged misappropriation occurred more than two years before suit was filed, later discovery does not save the claim. (Derived from Computer Associates International, Inc. v. Altai, Inc. (n.d.).)