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In 2010, two parties, AcryliCon USA, LLC (AcryliCon) and Silikal GmbH (Silikal) agreed to share rights to a secret formula for a flooring resin known as 1061 SW.  Under the agreement, Silikal would manufacture 1061 SW and AcryliCon and its affiliates would have exclusive rights to distribution. After Silikal began selling 1061 SW without permission, AcryliCon sued for breach of their agreement and for misappropriation of a shared trade secret. A jury awarded AcryliCon $1.5 million in damages on each of the two claims and $3 million in punitive damages on the misappropriation claim. Silikal appealed, arguing, among other things, that AcryliCon failed to prove its misappropriation claim. In a recent decision, the U.S. Court of Appeals for the Eleventh Circuit agreed.

The dispositive issue was all about timing. Under Georgia trade secret law, as in many states, a misappropriation claim requires that the trade secret be acquired under circumstances giving rise to a duty to maintain its secrecy. Thus, to prevail, AcryliCon had to prove that Silikal’s duty to maintain the formula’s secrecy (or limit its use) arose at the time Silikal “acquired” the formula.

The catch was that AcryliCon did not exist in 1987, when Silikal and Bjorn Hegstad, a chemical engineer who founded AcryliCon’s international affiliate, jointly developed the formula. In other words, Silikal “acquired” the formula in 1987 and to the extent it owed any duty of secrecy at the time of acquisition, that duty was owed to Hegstad and the international affiliate he had founded, not to AcryliCon. To the extent, Silikal owed any duty to AcryliCon, that duty did not arise until 2010, when the parties entered their 2010 sharing agreement. But at that point, it had been 23 years since Silikal had acquired the trade secret. Thus, Silikal’s sharing of the 1061 SW may have breached the parties’ contract, but, by law, the sharing could not constitute misappropriation of a trade secret.

The case can be read at AcryliCon USA, LLC v. Silikal GmbH, –F.3d —, 2021 WL 248273 (11th Cir. 2021).