Second Circuit Reinforces Specificity in Software Trade Secrets and Limits NDAs to Information Actually Treated as Confidential — Capricorn Mgmt. Sys., Inc. v. GEICO & CCC (2d Cir. 2025)

Second Circuit Reinforces Specificity in Software Trade Secrets and Limits NDAs to Information Actually Treated as Confidential — Capricorn Mgmt. Sys., Inc. v. GEICO & CCC (2d Cir. 2025)

Court: U.S. Court of Appeals for the Second Circuit

Date: September 30, 2025

Disposition: Partial final judgment affirmed; remaining appeal dismissed for lack of jurisdiction

Note: Summary Order (non-precedential under FRAP 32.1 and 2d Cir. Local Rule 32.1.1)

Introduction

This case arises out of a long-running relationship between a software vendor, Capricorn Management Systems, Inc. (Capricorn), and an insurer, Government Employees Insurance Company (GEICO), involving an insurance software system known as “Supercede.” Capricorn alleged that GEICO and Auto Injury Solutions, Inc. (now merged into CCC Intelligent Solutions Inc., referenced herein as CCC) improperly disclosed, converted, and misappropriated its software and proprietary information, violating a 2005 non-disclosure agreement (NDA), New York conversion law, and federal and Maryland trade secret statutes.

After the district court (Judge Denny Chin, sitting by designation in the Eastern District of New York) granted summary judgment to GEICO and CCC on three claims—breach of contract, conversion, and misappropriation—the court certified those rulings for immediate appeal under Federal Rule of Civil Procedure 54(b). The Second Circuit accepted jurisdiction over the certified issues, affirmed the summary judgment rulings, and dismissed the remainder of the appeal (concerning expert preclusion) for lack of appellate jurisdiction because that ruling was not part of the Rule 54(b) certification.

Although issued as a non-precedential summary order, the decision provides a clear and practical synthesis of several recurring doctrines in technology and trade secret disputes: (1) NDA coverage turns on whether the information was actually treated as confidential; (2) conversion of intangibles under New York law requires exclusionary control, not mere possession alongside the plaintiff; and (3) trade secret claims—particularly for software—require granular identification of the secret elements and proof that they are not readily ascertainable.

Summary of the Opinion

  • Rule 54(b) jurisdiction: The court held that the dismissed claims were sufficiently distinct from remaining claims and counterclaims to support immediate appellate review (Novick v. AXA Network, LLC, 642 F.3d 304, 311 (2d Cir. 2011)).
  • Breach of contract (Maryland law): The NDA’s definition of “Confidential Information” did not blanket-cover “all” of Capricorn’s operations, technology, or systems; rather, the agreement protected only information the parties actually treated as confidential and proprietary. Capricorn failed to produce evidence that the described demonstrations or functions of Supercede were treated as confidential at the time of the 2005 NDA or during the parties’ long pre-NDA licensing history. Summary judgment for GEICO affirmed.
  • Conversion (New York law): Conversion requires the defendant’s exercise of control over property to the plaintiff’s exclusion. Capricorn retained copies of Supercede and failed to show that GEICO’s so-called “master copy” was meaningfully different from Capricorn’s own copies or that CCC exercised control over any copy. Summary judgment for both defendants affirmed.
  • Trade secret misappropriation (DTSA and Maryland UTSA): Capricorn’s descriptions of Supercede “as a whole,” and of general functions like data exchange and report generation, were too vague and common to satisfy the requirement that trade secrets be identified with specificity and shown not to be readily ascertainable. Summary judgment dismissing the DTSA and MUTSA claims affirmed (citing Syntel Sterling Best Shores Mauritius Ltd. v. TriZetto Group, Inc., 68 F.4th 792 (2d Cir. 2023)).
  • Expert preclusion: The district court had precluded Capricorn’s experts for failure to submit reports under Rule 26(a)(2), but because that order was not included in the Rule 54(b) certification, the Second Circuit lacked jurisdiction to review it and dismissed that portion of the appeal.

Detailed Analysis

Precedents and Authorities Cited

  • Rule 54(b) Certification — Novick v. AXA Network, LLC, 642 F.3d 304, 311 (2d Cir. 2011): Cited to confirm that the dismissed claims were sufficiently distinct from remaining issues, warranting partial final judgment and appellate review.
  • Contract Interpretation (Maryland law):
    • Credible Behavioral Health, Inc. v. Johnson, 220 A.3d 303, 310 (Md. 2019): Courts seek to ascertain the parties’ intent and interpret the contract consistently with that intent.
    • JMP Assocs., Inc. v. St. Paul Fire & Marine Ins. Co., 693 A.2d 832, 834 (Md. 1997): Maryland disfavors constructions that render contractual language superfluous.
    • Landaverde v. Navarro, 189 A.3d 849, 860 (Md. 2019): Terms are given their ordinary and accepted meaning absent a special definition or context.
  • Conversion (New York law):
    • Oliver v. Boone, 149 N.Y.S.3d 24, 25 (1st Dep’t 2021): Conversion requires the defendant’s exercise of control over property to the plaintiff’s exclusion.
    • Thyroff v. Nationwide Mutual Ins. Co., 8 N.Y.3d 283, 288–89 (2007): Recognizes conversion for electronic records, but the exclusionary control element remains essential.
  • Trade Secrets (DTSA and Maryland UTSA):
    • DTSA, 18 U.S.C. § 1839(3)(B); MUTSA, Md. Code Ann., Com. Law § 11-1201(e)(1): A trade secret must derive independent economic value from not being generally known and not being readily ascertainable by proper means.
    • Syntel Sterling Best Shores Mauritius Ltd. v. The TriZetto Group, Inc., 68 F.4th 792, 800–01 (2d Cir. 2023): The claimant bears the burden to identify alleged trade secrets with specificity and to separate them from non-secret elements.
    • Restatement (Third) of Unfair Competition § 39 cmt. d: Supports the specificity and separability requirement for trade secret identification.
  • Expert Disclosures — Fed. R. Civ. P. 26(a)(2): Requires expert reports; noncompliance can lead to preclusion (not reviewed here due to jurisdictional limits).
  • Appellate Practice — FRAP 32.1; 2d Cir. Local Rule 32.1.1: Summary orders are non-precedential; citation is permitted with proper notation.

Legal Reasoning and Application

I. The NDA: “Confidential Information” Means Information Actually Treated as Confidential

The 2005 NDA barred either party from disclosing “Confidential Information,” defined in a “Whereas” clause to include “confidential and proprietary” information relating to a party’s operations, technology, or systems, regardless of medium. Capricorn argued that the NDA covered “all” of its operations, technology, and systems—effectively a blanket confidentiality regime. The court rejected that reading as inconsistent with Maryland interpretive principles.

Key steps in the court’s reasoning:

  • Ordinary meaning and intent: The phrase “confidential and proprietary” carries an ordinary meaning that requires actual treatment as confidential. A construction that makes confidentiality automatic for everything would render those qualifiers meaningless (Credible Behavioral Health; JMP Associates; Landaverde).
  • Evidence of treatment as confidential: Capricorn did not produce evidence that the parties treated demonstrations or descriptions of Supercede’s functions as confidential at the time of the NDA, nor that the parties intended to keep those functions secret during the nearly two decades prior to the 2005 NDA when Capricorn licensed Supercede to GEICO.
  • Application to the alleged disclosures: Even assuming GEICO showed CCC fields or functionality of Supercede, Capricorn failed to link those demonstrations to materials actually treated as confidential under the parties’ course of dealing.

Outcome: Summary judgment for GEICO on the NDA claim was affirmed.

II. Conversion: “Exclusive Control” Is Essential, and a “Master Copy” Label Is Not Enough

Under New York law, conversion requires that the defendant exercise control over the plaintiff’s property to the plaintiff’s exclusion (Oliver; Thyroff). Capricorn conceded it retained copies of Supercede, but argued that GEICO possessed the sole “master copy,” satisfying the “exclusion” element.

The court found this insufficient because:

  • No meaningful distinction: Although the record referenced a “master copy,” Capricorn did not show that GEICO’s copy differed from Capricorn’s own copies in any material way, much less that GEICO’s possession excluded Capricorn from using or controlling the software.
  • No proof against CCC: Capricorn also failed to adduce evidence that CCC exercised control over any copy of Supercede.

Outcome: Summary judgment for GEICO and CCC on conversion affirmed.

III. Trade Secrets: Software Claimants Must Specifically Identify the Secret and Show It Is Not Readily Ascertainable

Both DTSA and MUTSA require that the information derive independent economic value from not being generally known and not being readily ascertainable by proper means. The claimant must identify the secret with specificity and separate it from non-secret content (Syntel; Restatement § 39 cmt. d).

Capricorn argued that Supercede was a trade secret “as a whole,” and that its “modules and methods” were secret. The court held this was too vague for several reasons:

  • Vagueness and generality: Descriptions such as sending data “back and forth” and generating “flags, reports, [and] forms” are common software functions across industries; without more, such features are not protectable as trade secrets.
  • No non-ascertainability showing: Capricorn did not point to evidence that these functionalities, or a specific combination/implementation of them, were not readily ascertainable within the insurance software industry, as DTSA and MUTSA require.
  • No separation from public or non-secret elements: The claim failed to separate alleged secrets from commonplace or publicly available components—precisely the defect Syntel cautions against.

Outcome: Summary judgment dismissing both federal and Maryland trade secret claims affirmed. Notably, the court’s analysis resolved the case on the identification and ascertainability elements without reaching other prongs (e.g., reasonable measures or misappropriation conduct).

IV. Experts: Rule 26(a)(2) Compliance and Appellate Jurisdiction

The panel noted that Capricorn’s experts had not provided the reports required by Rule 26(a)(2), which supported the district court’s preclusion ruling. But because the preclusion order was not included in the Rule 54(b) certification, the Second Circuit lacked jurisdiction to review it at this stage and dismissed that portion of the appeal.

Impact and Practical Implications

1) NDAs: Draft and Perform to the Confidentiality You Want Enforced

  • A definition is not a blanket: Even broadly-drafted NDAs will be read to protect only information actually treated as confidential. Parties should avoid language or practices that suggest non-secret treatment.
  • Operational discipline matters: Mark confidential materials, restrict access, maintain logs, and condition third-party demonstrations on written NDAs. Absent such practices, courts may find no enforceable confidentiality around demonstrations or field layouts.
  • Beware long pre-NDA histories: Where products have been shared or deployed for years before an NDA, it is harder to argue that functionality descriptions (as opposed to source code or specific proprietary schemas) were ever treated as confidential.

2) Software Trade Secrets: Specificity Is the Gatekeeper

  • Identify the “what” and the “why”: Specify the secret elements—e.g., algorithms, parameter weightings, proprietary data models, schema designs, unique workflow logic, or non-obvious combinations—and explain how they provide competitive value because they are not generally known and not readily ascertainable.
  • Separate secret from non-secret: Provide charts or narratives distinguishing protectable content from public or standard features (e.g., generic reporting or data exchange), consistent with Syntel.
  • Show non-ascertainability: Use evidence (industry surveys, expert analysis, market practice) to demonstrate that competitors could not readily obtain or replicate the specific combination or implementation by proper means.
  • Combination secrets are possible but must be defined: If asserting the “whole” as a compilation secret, delineate the elements of the compilation and show why that particular configuration is not readily ascertainable and confers independent economic value.

3) Conversion of Intangibles in New York: Exclusion Is the Rubicon

  • Possession alongside the plaintiff is not conversion: Even where electronic data can be the subject of conversion (Thyroff), a claim fails without proof that the defendant’s control excluded the plaintiff’s dominion or access.
  • “Master copy” labels are not talismans: Without showing that a “master copy” is unique or that its possession deprives the plaintiff of use, courts are unlikely to find conversion.

4) Litigation Posture: Early Summary Judgment Pressure Points

  • Expect challenges on specificity and ascertainability: Defendants will press Syntel’s specificity requirement early; plaintiffs should be prepared with detailed trade secret identifications before discovery closes.
  • Expert compliance is essential: Timely Rule 26(a)(2) reports are critical to avoid preclusion. Remember that appellate review of such rulings may be unavailable absent inclusion in a Rule 54(b) certification or a final judgment.
  • Partial final judgments: Parties seeking immediate appeal on discrete issues should ensure orders are certified under Rule 54(b) and that the certified claims are genuinely distinct under Novick.

Complex Concepts Simplified

  • Summary Order (Second Circuit): A non-precedential decision that can be cited but does not bind future panels. It signals how the court applies existing law to recurring fact patterns.
  • Rule 54(b) Partial Final Judgment: Allows immediate appeal of fully resolved claims when they are distinct from unresolved claims. Without certification, most interlocutory orders are not appealable.
  • “Confidential Information” in NDAs: Typically covers only information actually treated as confidential and proprietary. Courts look at contract language and real-world conduct (markings, access limits, NDAs with third parties).
  • Trade Secret “Specificity”: Plaintiffs must precisely identify what is secret. Saying “our software” or describing generic functions is insufficient; courts require a roadmap of the secret parts and why they are not easily discoverable.
  • “Readily Ascertainable”: Information that industry participants can readily obtain or reverse-engineer by proper means generally is not a trade secret, even if it is valuable.
  • Conversion of Electronic Data (NY): New York recognizes conversion of intangibles, but the plaintiff must show the defendant’s control excluded the plaintiff’s own control or access.

Conclusion

Capricorn v. GEICO & CCC underscores three practical rules that frequently decide software and trade secret cases:

  • NDAs protect what you actually keep confidential, not everything you do. Courts will not stretch “confidential and proprietary” language to cover generic functionality that the parties did not treat as secret.
  • Conversion of intangibles demands exclusion. Mere co-possession or invocation of a “master copy” without proof of deprivation will not suffice.
  • Trade secret claims live or die on specificity and non-ascertainability. Plaintiffs must isolate the secret elements, explain their unique value, and show they cannot be readily discovered by proper means.

While non-precedential, the Second Circuit’s synthesis of Maryland contract principles, New York conversion doctrine, and DTSA/MUTSA requirements is a valuable roadmap for litigants. Vendors and licensees in the insurance technology space—and beyond—should heed the operational and evidentiary lessons: draft NDAs to match real confidentiality practices; maintain discipline in labeling and restricting sensitive materials; and, when litigating, identify trade secrets with the particularity Syntel demands. Failure on any of these fronts invites early dismissal on summary judgment, as this case demonstrates.

Case Details

Year: 2025
Court: Court of Appeals for the Second Circuit

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