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Integrated Cash Management v. Digital Transactions

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Citation Edit

Integrated Cash Management Services, Inc. v. Digital Transactions, Inc., 920 F.2d 171 (2d Cir. 1990) (full-text).

Factual Background Edit

Integrated Cash Management Services, Inc. (ICM) is a company that designs and develops computer software. ICM customizes these generic programs to suit the needs of its clients. ICM claims that while the programs themselves may not be protected as trade secrets, the specific combination of elements that they developed should be protected.

Defendants Newlin and Vafa, computer programmers with ICM until 1987, worked on several of the generic programs that ICM produced. In 1987 both Newlin and Vafa left ICM and began working for Digital Transactions, Inc. (DTI). Both defendants had signed a nondisclosure agreement with ICM, in which they agreed not to disclose or use any confidential or proprietary information once they left the employ of ICM.

Prior to leaving ICM Newlin and Vafa copied certain files that they had worked on. Two weeks after Newlin and Vafa began work at DTI, DTI began to create a prototype database program similar to that used by ICM, as well as several other programs created by ICM.

Appellate Court Proceedings Edit

The Court of Appeals held that ICM's software was a trade secret and affirmed the permanent injunction issued by the trial court, which was aimed at preventing the defendants from distributing those programs that were unlawfully obtained from ICM.

The court held that the manner in which ICM's programs interact is the key to the products' success and is not generally known outside of ICM. In addition, the court held that ICM had satisfied sufficient factors as to the protection of its secret.

Defendants argued that the programs that make up the product were in the public domain and should not be protected as trade secrets, however; the court held[1]:

a trade secret can exist in a combination of characteristics and components, each of which, by itself, is in the public domain, but the unified process, design and operation of which, in unique combination, affords a competitive advantage and is a protectable secret.

The court also held that ICM had taken reasonable measures to protect the secrecy of its product, citing such factors as locking the doors of the premises, and requiring employees, including Newlin and Vafa, to sign nondisclosure agreements.


  1. Citing Imperial Chem. Indus. Ltd. v. National Distillers & Chem Corp., 342 F.2d 737, 742 (2d Cir. 1965) (full-text).

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