The inevitable disclosure doctrine is a concept rooted in common law that allows a plaintiff to prove trade secret misappropriation by “demonstrating that defendant’s new employment will inevitably lead him [or her] to rely on plaintiff’s trade secrets.” PepsiCo., Inc. v. Redmond, 54 F.3d 1262, 1269 (7th Cir. 1995). Thus, the defendant threatens misappropriation merely by holding the trade secreted information in his or her head while working for a direct competitor. States take varying approaches to this doctrine either fully allowing its use, allowing its use with limitations, or prohibiting its use.
At the height of the pandemic, companies and governments around the world scrambled to develop and distribute COVID-19 vaccines. One such relationship involving HDT Bio, a Seattle-based biotechnology company, and Emcure, one of India’s largest manufacturers and distributors of generic drugs, has resulted in a fight over ownership of the life-changing formula. According to HDT Bio, in early 2020, the head of an Emcure subsidiary, Gennova Biopharmaceuticals Ltd. (“Gennova”), visited the HDT Bio headquarters to discuss bringing HDT Bio’s then-incipient COVID-19 vaccine to market in India. The parties formalized this relationship with an exclusive license agreement, and Gennova received a limited license to use HDT Bio’s COVID-19 vaccine and delivery platform, while HDT Bio received payments and royalties along with data from Gennova’s distribution to enable the development and sale of vaccines around the world.…
In 1992, Elizabeth Elting and Philip R. Shawe founded TransPerfect Global, Inc. (“TransPerfect”), a provider of language and technology solutions for businesses around the globe. When Ms. Elting wanted to dissolve her relationship with TransPerfect, the company held an auction and a custodian made some of TransPerfect’s confidential information available to potential bidders. The custodian’s agent, however, mistakenly gave the bidders access to trade secreted materials, such as TransPerfect’s proprietary pricing methodology, the average rate of pay for linguists, and customer revenue averages.…
In 2016, Sanchez Oil and Gas Corporation, Sanchez Energy Corporation, and Sanchez Production Parts LP (collectively “Sanchez”) sued three former employees—B.J. Reynolds, Mark Mewsha, and Wes Hobbs—and their new employer, Terra Energy Partners, LLC (“Terra Energy”) (collectively “Defendants”) for misappropriation of trade secrets. For the past three years, the parties have been litigating whether Defendants could move to dismiss an amended petition. A recent decision by the Texas Supreme Court has again sent this case to the Texas Court of Appeals to review its December 2020 decision.
Continue Reading Texas Supreme Court Gives New Life to Dismissal of Misappropriation Claim
On October 15, 2021, Judge Charles Ronald Norgle, of the United States District Court for the Northern District of Illinois, awarded Motorola Solutions, Inc., and Motorola Solutions Malaysia SDN (collectively “Motorola”) $34,244,385.50 in attorneys’ fees from defendant Hytera Communications Corporation Ltd. ( “Hytera”). Motorola prevailed over Hytera on its trade secret misappropriation and copyright infringement claims, with the jury awarding $760 million on the trade secret misappropriation claim. The Court later reduced the award to $543.7 million, plus future royalties for Hytera’s continued use of the infringing radios. Motorola was entitled to reasonable attorneys’ fees under federal and Illinois trade secret acts because Hytera was found to have willfully and maliciously misappropriated Motorola’s trade secrets.
Continue Reading The Cost of Litigating “the Largest and Most Complex Case”: The Northern District of Illinois Awards over $34 Million in Attorneys’ Fees to Motorola
The U.S. Court of Appeals for the Seventh Circuit recently held that limited disclosures of a product, such as through patents and trade show displays, would not defeat a company’s reasonable efforts to protect its confidential information.
The case involves two competing medical device manufacturers: Life Spine, Inc. (Life Spine), which makes and sells surgically implanted medical devices to treat spine disorders; and AegisSpine, Inc. (Aegis), which sells similar medical devices created by its parent company L&K Biomed, Inc. (L&K). Life Spine spent more than three years of intensive study and exhaustive trial and error to design and develop its ProLift Expandable Spacer System (ProLift), an expandable cage used to treat degenerative disc disease. Eventually, it was FDA approved and Spine Life obtained a patent. Although the patent displays drawings and figures of the expandable cage, Life Spine considers the “precise dimensions and measurements of the ProLift components and subcomponents and their interconnectivity” to be confidential trade secrets. …
Continue Reading Not All or Nothing: Trade Secrets Survive Patents and Other Limited Disclosures
In 2017, EMC Outdoor, LLC (EMC) terminated Jennifer Stuart’s employment. After, EMC filed suit against Ms. Stuart, Grandesign (Ms. Stuart’s current employer), and another former employee, alleging inter alia claims for misappropriation of trade secrets under federal and state law. On March 31, 2021, the Pennsylvania District Court granted summary judgment against EMC’s trade secret claims, finding no misappropriation because, under EMC’s employment agreement, Stuart was not required to keep trade secrets confidential following her termination.
Continue Reading Draft Your Employment Agreements Carefully: A Questionable Word of Warning from the District of Pennsylvania
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.
Continue Reading Timing Is Everything: Eleventh Circuit Finds No Misappropriation Under Georgia Trade Secret Law
In the early 2000s, New York City experienced a surging bedbug epidemic. In response, the company FabriClear created a spray to treat bedbug infestations, which it called “FabriClear” (“the FabriClear Product”). In 2013, FabriClear approached Harvest Direct, a company that markets and sells “As Seen on TV” products, to discuss bringing the FabriClear Product to market. The two companies executed a confidentiality agreement, which specified that Harvest Direct could not reproduce, use, alter, or modify the FabriClear Product formula without FabriClear’s written permission. The parties later negotiated a licensing agreement, giving Harvest Direct the right to the exclusive license to market and sell the FabriClear Product and to use FabriClear’s “trademarks, trade names, copyrights, trade secrets, technical data, information, know-how, formulas, and other intellectual property rights.” The FabriClear Product sold very well for approximately five years, but toward the end of 2018, sales started to decline. It turned out that Harvest Direct had started marketing its own competing bedbug product (the “X-Out Product”). Harvest Direct started working on its product in 2015, and its product was indistinguishable from the FabriClear Product, including very similar packaging. Indeed, there was evidence presented that, at some point, Harvest Direct just repackaged existing bottles of the FabriClear Product. One of the bottles investigated by the FBI revealed a FabriClear Product label under the X-Out Product label. FabriClear then filed suit against Harvest Direct for misappropriation of trade secrets, among other claims.
Continue Reading Battling Bedbugs: Massachusetts District Court Allows Case Against Distributor that Created a Competing Product to Move Forward
In June 2020, we wrote about a Texas appellate court overturning a $740 million judgment for real estate analytics company HouseCanary because the jury instructions included theories of liability for which there was no evidence and allowed recovery on claims that were preempted by the Texas Uniform Trade Secrets Act.
On June 18, 2020, the…