## Facts

- Northern Electric Company, Inc. (Northern) operated an electric-motor repair shop and also repaired servo motors, which require multiple, model-specific data points to diagnose and repair.
- Patrick L. Torma, Jr. (Torma) became the supervisor of Northern’s servo-motor repair service in the mid-1990s.
- During his employment, Torma compiled a large body of servo-motor information to aid repairs, including:
  - data readings and information obtained from repairing Northern’s customers’ motors (and he directed other Northern employees to record similar readings),
  - notes from conversations with manufacturer representatives and other servo-motor shops,
  - excerpts from manuals,
  - information from Northern’s service bulletins, and
  - information from internet sources.
- Torma organized the collected material into a single compilation stored on a CD-ROM, which he arranged at night on his home computer.
- Torma generally kept the CD-ROM under his control, including locked in his toolbox, on his person, or at home.
- In June 2002, after a compensation disagreement, Torma resigned.
- Northern demanded that Torma leave the CD-ROM (and its compilation) with the company, but Torma refused and kept it.
- Torma started a competing servo-motor repair business, Hy-Tech Automation Repair, Inc. (Hy-Tech).
- Northern sued Torma and Hy-Tech seeking temporary and permanent injunctive relief and asserting claims that included trade-secret misappropriation under the Indiana Uniform Trade Secrets Act (IUTSA), statutory conversion under Indiana’s Victim’s Relief Act, and breach of fiduciary duty.
- The trial court entered judgment for Torma and Hy-Tech, concluding the compilation belonged to Torma, was not a trade secret, and did not support conversion or fiduciary-duty liability; the court also awarded attorneys’ fees against Northern.
- Northern appealed.

## Issues

1. Whether the trial court erred by concluding that Torma (rather than Northern) owned the servo-motor data compilation created during Torma’s employment and organized on Torma’s home computer.
2. Whether the compilation qualified as a trade secret under the Indiana Uniform Trade Secrets Act.
3. Whether Torma’s retention and use of the compilation after resignation constituted statutory conversion under Indiana’s Victim’s Relief Act.
4. Whether taking and using the compilation for a competing business breached Torma’s fiduciary duty to Northern.
5. Whether the trial court properly awarded attorneys’ fees against Northern.

## Decision

- The Court of Appeals reversed the judgment for Torma and Hy-Tech and remanded for further proceedings.
- The court held the servo-motor data compilation was created within the scope of Torma’s employment and for Northern’s business, so it belonged to Northern; compiling or organizing it at home did not make it Torma’s property.
- The court held the compilation qualified as a trade secret under IUTSA because it had independent economic value from not being generally known or readily ascertainable and because reasonable steps were taken to keep it secret.
- The court held that, because the compilation was Northern’s property and Torma refused to return it and used it after leaving, the evidence supported civil liability for statutory conversion.
- The court held Torma breached his fiduciary duty by retaining and using Northern’s confidential compilation in a competing business.
- The court held the attorneys’ fee award against Northern could not stand in light of the appellate holdings, and it was reversed.

## Legal Principles

- Work product and information generated by an employee within the scope of assigned duties for the employer’s business is the employer’s property; an employee’s after-hours organization of that material on personal equipment does not transfer ownership.
- Under IUTSA, a compilation can be a trade secret when the selection and arrangement of information yields independent economic value from secrecy, even if some underlying components come from manuals, bulletins, conversations, or other lawful sources.
- “Not readily ascertainable” may be shown by the time and effort required to assemble the information and by evidence that the compilation has market value to competitors.
- The secrecy element requires reasonable efforts, not absolute secrecy; limited access, internal controls, and the way the information is handled within the business may satisfy the requirement.
- Indiana’s Victim’s Relief Act permits civil recovery upon proof of the elements of criminal conversion—knowingly or intentionally exerting unauthorized control over another’s property—without requiring a criminal conviction.
- Employees owe a duty of loyalty and may not take and use an employer’s confidential information or trade secrets to compete; doing so can support fiduciary-duty liability.
- Attorneys’ fees imposed against a party based on a finding that claims were baseless or improperly pursued should be reversed when the record supports the party’s ownership and trade-secret rights.

## Conclusion

The Court of Appeals held that the servo-motor repair data compilation assembled by Northern’s supervisor during his employment belonged to Northern and qualified as a trade secret under IUTSA; by refusing to return it and using it to compete through Hy-Tech, Torma supported statutory conversion and fiduciary-duty liability, and the trial court’s fee award against Northern was reversed.


Northern Electric Company, Inc. v. Torma, 819 N.E.2d 417 (2005)